December 2023

Ashley:
This is Real Estate Rookie Episode 350. My name is Ashley Kehr and I’m here with my co-host, Tony J. Robinson.

Tony:
And 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. And today, we’re talking about liability, we’re talking about lawsuits, we’re talking about how to protect yourself as a real estate investor in all things LLCs.

Ashley:
One of the biggest questions that are asked on the BiggerPockets forums, that are asked in the Real Estate Rookie Facebook group, that is asked on the Rookie at YouTube channel that is submitted to biggerpockets.com/reply is, do I need an LLC? So, this can be because you are starting a business, you are buying a rental property, or maybe you already have property and wondering if you’re not going to be living there as your primary residence, if you need to transfer it into an LLC.
Today, we are going to break down all of the elements and all of the questions you should be asking yourself if you are going to consider opening an LLC and if it’s worth it for you or not.

Tony:
Yeah. We’re going to answer questions like, do you need to have your LLC set up before you submit your offer? What does financing look like for your LLCs? How many should you have? So, all things LLCs about investing in real estate. Now, I just want to preface this episode by saying that neither Ashley nor I are attorneys, so don’t take this as legal advice.
I think still go talk to someone that knows your state, that knows your local laws, they can help you get set up correctly. But we’re just going to talk at a 30,000-foot level, some general principles about LLCs and how they apply to you as a real estate investor.

Ashley:
And I know you guys can’t stand it when we say this, but this is going to be one of those questions where it depends on your own situation, but we are going to help you figure it out if an LLC is right for you or not.

Tony:
Now, I want to give a quick shout out to someone by the username of Casey Intero. Casey left us a five-star review on Apple Podcast and said, “I can’t express how much I adore this podcast. As a seasoned real estate agent and investor, I find myself learning something new every single week. My husband and I eagerly dive into discussions about each episode.
The authenticity and down to earth nature of your guests truly resonates with me. Thank you guys so much.” So, if you guys haven’t yet… guys, 60 seconds, two minutes max for you to go on to Apple Podcast, YouTube, wherever you’re listening, take a few minutes, write that review. It really does help us reach more folks. And when we reach people, we tend to help them, which is what we’re all about here at the Rookie Podcast.

Ashley:
So, one of the things we’re going to talk about are different factors to consider when determining if you need an LLC. The first thing I’m going to say is if your attorney or even your CPA recommends that you have an LLC, then yes, you should probably do it. There are different costs that are associated with having an LLC, and I think that is one of the first determining factors.
Is it cost-effective for you to have an LLC? Because one of the issues that comes up along with should I have an LLC or should I not is should I have an LLC for each property? And that is a whole another question upon itself. But Tony, let’s do a little comparison here, talking about costs. But in New York State to file an LLC, it is $200. And what is it in California?

Tony:
California, if I’m not mistaken, it’s $800 per LLC.

Ashley:
And then, there’re also fees that can accumulate every single year. You have to pay another… for mine, its $25 a year. Do you know what it is for yours, Tony, for California?

Tony:
I don’t know what it is per year, yeah.

Ashley:
Okay. So, that’s just one of the things to consider, but we’re also going to talk about your net worth and why are you considering an LLC because you want that liability protection? Well, very, very sorry to say, but if you have no net worth, you have no assets, when somebody sues you, you have nothing that they can take.
So, maybe you’re renting an apartment, you have no savings, you don’t have a car and you ride your bike, you are in great position to maybe not even need an LLC, and go ahead, and take that risk of getting sued.
But we’re going to talk about these different scenarios, things like that, which will impact if you have a lot of money sitting in your bank account, and somebody sues you, an attorney is going to be more likely to want to take this other person’s case because they see that you have this high net worth, and you have these assets that are able to take instead of somebody who has nothing.
And if you try and sue them, they’re not really going to get anything if they don’t have anything to take. The next thing we’ll talk about, partnering, is if you have a partner for an LLC, you need to think about opening up yourself to liability by partnering with somebody. So, if you have that LLC, you have your company, you have your structure, and you can also do a joint venture agreement too.
What we don’t like to recommend is that you go into a property-owning it with somebody that is in both of your personal names and there is no contract or an agreement put in place. And sometimes having that LLC and then definitely that joint venture agreement can really help with that. But the joint venture agreement is a whole another episode.
And maybe, Tony, we need to have you do a full episode on that because I’ve done more LLCs and Tony has done more joint venture agreements. So, you can listen to this episode, learn all about LLCs, and then we’ll do another one, and we’ll learn all about joint venture agreements, and then you guys can compare, and maybe see one of those are better than actually owning the property in your personal name if you are partnering with someone.
But you can also check out the book, “Real Estate Partnerships,” too. So, you’re buying this property with somebody, you can check out Real Estate Partnerships by myself and Tony Robinson. And you can find that on Amazon or the Bigger Pockets bookstore. Okay. So, I want to let you know that if you do decide to go with an LLC, it’s not just a matter of opening up the LLC, and you are protected, nobody can sue you, yay.
You have this invisible shield around your rental property and yourself. There are rules that you have to follow so that you do not pierce that corporate veil. So, what we’re talking about here is, for example, know what your state laws and regulations are for having an LLC. So, do you have to have a meeting every year that you have to document that you had your meeting minutes documented?
Do you have to file a biennial statement? There’s actually a new law coming out too in January 2024 that is for your LLC, where you have to notify the IRS who the beneficial owners are of your company. And I believe this is 20% or more ownership that somebody has in a company, an LLC, for example. You have to report who those people are and you only have to do it once.
But some of these things, if you do not do this, then this is where you will not be considered in New York, I don’t know if it’s everywhere else, but consider it in good standing. So, to have your LLC in good standing, you have to follow all these rules, you have to file these forms, you have to pay your taxes, file your tax return, things like that. You, more importantly, cannot co-mingle funds.
So, that’s an issue too is make sure there’s no reason for somebody to come after you personally if you’re using the LLC because maybe you are putting some of your personal funds in there or you’re using the business account to pay for personal funds, but you’re not actually recording it as that. So, there are a lot of different ways that you cannot follow the rules and regulations of actually having the LLC in place, which ultimately will make it ineffective, and there is no point in paying that money to get it set up.
Last thing I would touch on is setting it up. Make sure it’s set up correctly. I had an attorney show me how to set up an LLC, and now going forward, I set them up. I also use a company called, I think it’s USA Corp or Corp USA. And they do some of the legwork for me too, such as the publishing requirement. In New York State, you have to publish in two newspapers.
One that’s published weekly, one that’s published daily for six weeks, and it’s just stating that you are opening an LLC in that name, and if anybody does want to sue me, they serve the paperwork to this address or whatever you put down. So, there are companies out there that will do some of the legwork for you.

Tony:
How many people actually read in the newspaper to check for that stuff? That’s crazy.

Ashley:
But you know what people do-do is they read those and then they go and buy domains.

Tony:
I got you. Smart. Yeah.

Ashley:
But as far as like, oh, I’m not looking, and reading, and six weeks into business, you hopefully don’t have anyone suing you yet, but it’s the fact that you’re establishing that this business is being created. And for example, if somebody maybe had some kind of trademark or licensing agreement on that name or something like that that you infringed upon, that’s where they would be notified and they could-

Tony:
And on that note, I don’t want all of our rookies that are listening to hear all this and feel overwhelmed. Ashley knows more about LLCs than I do for sure because I just offload pretty much all of that to my attorney. I’ve never set up an LLC myself. Whenever I need to do something, she just sends me an email and says, “Hey, fill this out, sign this document. I need to get this filed.”
So, if you don’t have either the bandwidth or the desire to know the ins and outs, still good, I think generally aware of what some of those requirements are. But if you don’t want to become an expert in LLCs, that’s fine. Just make sure you’ve got a good attorney on your side to walk you through these things that understand your state and how it works.
Now, and somewhat of a controversial statement, but my thought is that if the entire reason that you’re not buying your first real estate investment is because you’re waiting on getting this LLC set up, and you’ve been kicking the can down the road because you want to get this and check this box, just buy the property. If you find a good deal, don’t not buy it because you haven’t set up your LLC yet.
I would say let’s get that first property, let’s get that momentum going, and then set the LLC up right afterwards, and you can transfer title to your LLC afterwards. But I just see so many people who focus on the busy work of, “What else should I have? Or let me create business cards, let me get my website up and running.” All those are accessory activities to becoming a real estate investor.
The core focus is finding good deals, managing them correctly, and then getting your profits. So, just my two cents is like, hey, if you find a good deal, don’t not buy it just because you haven’t set up your LLC yet.

Ashley:
One thing along those lines, Tony, you made a great point. If you’re ready to jump on a property, when you get that property under contract, you can put your name, Ashley Kehr and/or assigns. So, that is stating that the contract is assignable. I guarantee I can’t even tell you the last time that I purchased property and I knew right away when I was signing, putting my offer out there on the contract was that I did not know what my LLC was.
I haven’t known for a long time which one it would go into. Which partner am I going to partner with, or what entity, am I going to be creating a new entity? And I just put that, I use one LLC as my development company, and I’ll put that LLC, and then and/or assigns as. And as I start to figure things out, and put the pieces together of how this deal is going to play out, that’s when I actually have my attorney change the contract and make sure that the deed is actually to the LLC that I want it to be.
So, let’s get into some of our questions, Tony. Our first question here is from Karina Jackson. If I’m planning to set up properties as LLCs, does my offer have to be from the LLC? I just answered that question. Well, I jumped the gun. What about the financing? I’m seeing comments that make me think I have to have the LLC established prior to applying for the loan. Is that correct?
So that the property is not in my private name. If applying for a mortgage as an LLC, does that change things like interest rate or payment required? So, there’s lots of variables that come into play here. So, when you’re purchasing the property, if you are going to have the property into an LLC instead of your personal name, it doesn’t have to be in the contract right away.
You can put the and/or assigns as. I would be careful if you just put your name and then later on you don’t have that and/or assigns. I’ve run into situations where people say, no, no, no, this is who signed the contract. We’re not going and changing things, like this is how you’re buying it, and we had to fight around it. So, just to be safe, put that and/or assigns as so you can assign it to even another person or to your other entity, whatever that is.
Now, good follow-up question, what about the financing? So, yes, the bank wants to know who is going to be purchasing the property. And so, if you are going for residential long-term, thirty-year fixed, and it needs to be in your personal name, if you go, and change that on the contract before closing, and you close with an LLC on the deed instead of your personal name, that 100% will screw up, and put a halt on your financing and put a halt on your closing of that property.
So, that is something that you cannot do until after you have closed. If you close on the property, then you can go ahead and change it into an LLC if you would like. But please, please, please read your mortgage documents to see what the due on-sale clause states. So, in some instances, they will say you cannot transfer the deed of this property to anyone that if you do, you’ll call the due on sale clause and you’ll be forced to pay home mortgage in full.
The second thing that could be in the due on-sale clause is that you may go ahead and transfer it into an LLC if it remains the same member ownership. So, for example, if I’m purchasing this property as 100% owner, me, Ashley Kehr, then I transfer it into an LLC, that LLC, I have to have 100% ownership still. If I transferred it into an LLC where I’m 80% owner now and Tony is 20%, that would be breaking the due on sale clause and they would say, “Hey, give us our money, you violated our mortgage agreement.”
Okay. Then, there’re also assignable mortgages, where you can assign them to whoever as long as the bank approves them. But that way, you can assign the same terms and everything like that, but they’ll actually do a formal vetting process of that person, which in turn would be your LLC. So, there is also subto where every day now tons of people go ahead and take over other people’s mortgage payments.
So, learn more about doing subto and you could just subto a property to your LLC, I guess. But there are definitely things you should be aware of that could happen and that is that due on sale clause of changing the ownership of the property. So, for myself personally, I had owned property in my personal name, I have mortgages that are in my personal name, and I transferred those properties into an LLC where I’m 100% owner.
And it’s been maybe three years now, and no bank has come to me and said, “We want your money.” Because remember, banks are not in the business of foreclosing on properties, and selling property, or even owning real estate. They want to keep receiving those mortgage payments.

Tony:
Yeah. Just the other part of this question, Ash, is do you have to have the LLC established before applying for the loan? And I’ve talked to a few different lenders and some want to see maybe more mature LLCs to give you the best rates and terms. Some are like, “Hey, just get your LLC set up during the closing period and as long as it’s created before we close, we’re fine with that.”
Typically, I’ve seen out more the hard moneylenders and things of that nature, but what’s your experience been, Ash? Do they typically want to see a fully formed mature LLC before you go under contract or what’s the timeline you’ve usually seen for your LLCs?

Ashley:
Depends on the bank financing. If I am going with a bank to get a loan, they want to see because they want the EIN number right away. That’s with the LLC, they want the name. So, if you’re doing commercial side of lending, they most likely want that. As far as fully formed, so technically, a fully formed LLC is one that has had that six-week publishing criteria established.
And that’s where you’ve done your six weeks in the newspaper after you created it, and you have your affidavit from the newspaper company saying that it’s all completed, and then you submit that to the state and you get your paper like, “Hello, you did the publishing requirement, you’re all set.”

Tony:
And just to clarify really quickly, that’s like a New York thing because we don’t have to do that in California. So, it’s going to vary from state to state. For us, I think as soon as we… I don’t know, whatever paperwork my attorney submits, and then she applies for the EIN, we get that back and we get two docs. We get our articles of organization that gets filed with the state.

Ashley:
Filing receipt.

Tony:
Yeah. And then, we get our EIN letter, and those are the two things we need to be fully formed in California.

Ashley:
Yeah. There’s definitely been a couple of times I’ve been asked to have the publishing requirement, show proof of that if that’s been done, but not all of the time. But I would say you don’t have to have it to actually close on a property. You don’t want to go ahead and put an LLC on a contract though that you don’t actually have that yet.
In New York State, you can look up if that name is actually available. It’s the name availability LLC in New York State, just search that. You can actually look and see, because sometimes even if a name is too similar, they won’t let you have it either. So, I would definitely not put an LLC, but it does take… I could go on right now and within 10 minutes, I could have an LLC and an EIN number to go along with it.
And then, go ahead and apply for a business credit card to go along with it all within an hour or less. So, I think for the loan, I recommend getting the LLC, at least having the name when you are applying for it because the LLC will be the name that’s actually on the loan documents and when you submit your loan application to the bank.

Tony:
So, the last part of Karina’s question here is if applying for a mortgage as an LLC, does that change things like interest rates or the payment structure? My experience has been that typically when you’re going the commercial route, your terms are going to be a little bit shorter.
So, instead of maybe having a 30-year fixed term like you do with a residential loan, your primary residence or a loan that’s in your personal name for an investment property, you might have a ten-year term. So, the length of that contract is a little bit shorter. Interest rates could usually be a point or two higher depending on which lender you’re working with.
Amortization period is going to vary. And I’ve seen some that go up to 30. Some we’ve looked at have been like 20, 25, so we’re in that ballpark. So, it depends, but we are typically seeing shorter-term, slightly higher interest rates when you’re going with the commercial debt through an LLC. What have you seen on your side, Ash?

Ashley:
Yeah. Most often, there has been one bank that I’ve found that will do an LLC on the residential side of lending, but most of the time you have to go to their commercial department, which usually means depending on the size of the bank, but even small banks where you have to go talk to a completely different lender who specializes in the commercial lending and submit a whole different application if you are using an LLC for that commercial side of lending.
And it’s usually only a fixed rate for, I’ve never seen more than 10 years, I’m sure there is out there, but it’s usually five, seven or 10 years that you get that fixed rate, and then it goes variable, or the loan actually becomes due. It’s a balloon payment where you have to go and refinance with the bank or a different bank too. But what they do is even though your interest rate is fixed for that short period of time, it could be amortized over 15, 20, or 25 years.
I haven’t seen 30 yet for the banks that I work with, but that helps keep your payment low, but it’s that interest rate that also is higher than the residential side. So, there is definitely a big difference in financing when using your personal name. You will get better terms as long as you have good credit and things like that than if you’re going with the LLC.
But most often, especially if it’s a new LLC, they’re going to ask you to sign for the LLC and be a personal guarantor on the loan anyways. So, they still are going to run your credit, want your social, and they’re going to put you on the hook for the loan. And then, eventually, you could remove yourself from the loan and have it be a non-recourse loan, where it’s no longer tied to you. If the loan isn’t paid, they can’t come at you personally for the dot.

Tony:
All right. Should we hit question two?

Ashley:
Okay. This question is from Oscar Chavez, is it better to get one LLC for your properties or one LLC per property? Looking long-term to protect myself and my assets, getting mixed opinions, having a meeting next week with my attorney, also live in Texas. Tony, hit us with all Texas laws and regulations on LLCs.

Tony:
Oscar, obviously neither me nor Ashley live in Texas, but again, just giving you the 30,000-foot view. You always want to balance the risk with the cost. To absolutely 100% minimize your risk, you would put every single property into its own LLC. That way if something happens at property A that ends up in a lawsuit and ends up with liability, all of your other properties, B, C, D, E, F, G are protected because it’s two totally separate entities.
Now, like Ashley and I talked about at the top of the show, remember that each new entity you set up creates additional cost, creates additional admin, creates additional just work for you. So, you want to balance like, “Okay, do I really want to spend, if I’m in California, that $800 every single time to set a new property? Do I really want to have to file a separate tax return for every single entity?
Do I really want to have a separate QuickBooks file for every single property?” So, those costs, they do start to add up, especially if you’re talking about buying a single-family residential long-term rental where maybe your cash flow every single year is a thousand to a few thousand bucks. You could potentially eat up the majority of your cash flow just in maintaining your LLC.
So, you’ve got to weigh that cost against like, “Do I want a separate one for each?” Now, again, to Ashley’s point earlier, if you’re a super high net worth individual, and you’re just super concerned about I’ve got $5 million sitting in the bank, and I’m super liquid, and I’m an easy target, then yeah, maybe go down that route.
But I think for most new investors who are starting off, who are probably not coming from a crazy high number for net worth, so maybe instead of doing one LLC per property, maybe it’s like a grouping. Like, hey, I’m going to put five in one LLC or I’m going to put 10 and one LLC, and then from there, you can separate it out.
So, what I’ve done in my business is that we have an LLC for different partnerships and that’s how we’ve grouped our entities. And Ashley, I think you do the same thing, where you have an LLC for each one of your partnerships that you’ve got, and that’s worked well for me.

Ashley:
Yeah. So, it’s not per property. Eventually, I think once it gets to a very high amount of equity available in those partnerships for those properties, then we would add onto another one. For example, in one partnership we are 50/50, we add a bunch of properties in there, and then we started a second LLC where I’m 60 and he’s 40, and then we started putting properties into that one.
But you can definitely distribute them out to different LLCs, but Tony hit it home as to the cost and the management of those LLCs. You pull up your bank account dashboard, and you have all these separate bank accounts now, you have all these different QuickBooks files now, you have to pay a-

Tony:
Bookkeeper.

Ashley:
… bookkeeper for each entity. You have to pay your accountant to file each tax return. And I think this year, it was $550 per an LLC for each of my LLC tax returns, which if you just have one duplex in there. That could be a month or two months cash flow, that $550. So, there’re advantages and disadvantages. If you open up more, you have a more overhead.
You open up less, you may expose yourself to more liability, but your overhead has decreased. So, that’s where you want to weigh that out and figure out a good number that’s comfortable for you too. And you can also get, we talk about this before, if you’ve read our real estate partnerships book, we talk about getting umbrella insurance.
So, if you are getting your personal name, getting umbrella insurance, then you can go ahead and put that over your personal name if you don’t have the LLC. But you can also get umbrella insurance on your LLC too. So, if you do have high equity in your LLC or maybe just do that LLC, you’ve just kept a lot of cash in that business account, you can go ahead and get umbrella policy.
The first partnership I ever had, we did an LLC, and we still have umbrella insurance policy over that just because it very inexpensive and we were so nervous when we first started as to what’s going to happen that we just wanted to protect ourselves as much as possible.
Okay. So, I guess in that situation weighed out. But if it’s going to be your first, second, third, fourth, maybe property, you can start out with that one LLC. Also, depending, maybe if you’re switching markets, if you’re investing in Georgia and you have other properties in Texas, maybe you’re going to split up your entities that way as the Georgia ones go in this LLC, the Texas ones go in this LLC too or by strategy. And I don’t co-mingle my short-term rentals with my long-term rentals. There’s a separate LLC for the short-term rentals and the long-term rentals too.

Tony:
Interesting. Why’d you do it that way, Ash?

Ashley:
Because the short-term rental is active, more active income for me because I don’t have a separate management company that manages the short-term rentals.

Tony:
Interesting. So, what my CPA told me was even if its arbitrage, regular Airbnbs, the fact it’s still considered rental income, so it gets treated the same from a tax perspective as long-term. Did you-

Ashley:
Yeah, it does, but I’m open to more liability on my short-term ones. I’m sorry, that’s what I meant as to I’m more active in it. There’s more actively I could make a mistake. But yeah, so that’s what I mean as to anything that is an active business for me that is not the long-term rentals or even the property management company, those are all separate. Anything my long-term rentals are in, there’s nothing that I have active business operating with them if that makes sense, I guess. But that’s the reason I keep them separate.

Tony:
Just thinking through the different LLCs that I have, I actually have my whiteboard over here. So, we have one for our education, our events side. It’s like all of our coaching program, our events, all the stuff we do. We have one LLC for that. We have one LLC for our cleaning company, one for our property management, one for most of our short-term.
And then, we set one for our commercial, even though that one doesn’t own any assets yet. And then, we also do our flipping through our media and education company, which is weird, but because it’s all active income from a tax perspective, we figured it’d be fine. But those are the big buckets that we have right now.

Ashley:
Yeah. I guess that was misleading for me to use the word active, but more personally involved or more of a business behind it, I guess. Yeah.

Tony:
And just to clarify, so what Ash and I are talking about active versus passive, from a tax perspective, those are treated differently. So, flipping and wholesaling, that’s considered active income, whereas rental income from short-term and long-terms are considered passive, and you’re taxed at a higher rate on your active income.
So, the tax guidance that I’ve been given is that you want to separate your active income and your passive income into separate entities to make sure you can maximize the tax benefits that come with the passive stuff.

Ashley:
Yeah. So, the LLCs that we have are the partnerships with the long-term rentals, and then there’s a property management company that’s its own LLC. There’s a development company that will be the project manager on rehabs. It’s also the LLC that we use when we purchase something before and that LLC does the due diligence, things like that.
It’s more of the acquisitions, I guess, side of it. And then, it will get dumped into whatever LLC I decide it goes into. And then, also the liquor store is its own entity. And that’s another thing too is if you have an active business that’s in one of your properties is that having those two separate LLCs is keeping those separate.
So, the building is an LLC and then the actual business is in an LLC. And then, the only thing is that the short-term rentals run out of that development company. But I think I need to actually create something that’s super focused on that short-term rental management.

Tony:
Yeah. And you can get super ninja with it too. I have a friend who he does short-term rentals and he bought an apartment building with his long-term rental LLC. He then signed a lease with his arbitrage LLC. So, he had a twelve-month lease with his arbitrage client, and that allowed him to get better financing because he had a long-term tenant that was signing this lease, even though he was still short-term renting it out.
But because they were two separate entities, two separate businesses, he was able to spend it that way because if you try and refinance with just your short-term rental income, typically, the rates are going to be a little bit different. It’s harder to get financing, but doing it that way, he was able to get better rates. So, yeah, man, you can go super deep and get super complex in how you structure the entities.

Ashley:
What’s the Augusta Rule loophole too? So, where you can rent out your primary residence for two weeks and not pay taxes on it. And this started because of the big golf tournament in Augusta, Georgia where people would leave and literally rent out their home for two weeks and they don’t pay taxes on that.
And you can also rent to your primary residence to your business to use as office space, a studio or to host a meeting instead of taking your team out to dinner, and you could have it in here. And there’re rules, it has to be of market rent or whatever. You can’t charge $20,000 to host an event for your business for two hours or whatever that is. But there’re so many different ways and that’s why it pays to have a great tax-planning CPA.

Tony:
Actually, I have my next tax session with my CPA in like a week, I think. So, I’m excited for that.

Ashley:
Mine is on the 18, yes, two weeks. Okay. We’re going to jump into our next question. And this one is actually going to be about a business credit card. So, actually getting financing, now that you’ve decided to create your LLC, you have your LLC put together. We’re also going to the last question, I took a peek at it. We are going to talk about insurance too.
So, let’s get into the business credit card first. I love business credit cards because they always have huge signup bonuses with $100,000 bonus points, so I can fly my kids to free with me to conferences. But if you are applying for a business credit card, you will need the LLC’s EIN. So, this question by Russell Breen is anyone know if you apply for a business credit card with your LLC EIN, could that count as debt or a hard inquiry on your personal credit score?
Great question. If you are getting a Capital One business credit card, that credit card will show up on your personal credit report. It will not for Chase, Wells Fargo, a bunch of other ones, but Capital One, I do know it will show up on your personal credit for the business card.

Tony:
I think the inquiry still shows on Chase even though the balance doesn’t, right?

Ashley:
Not for business.

Tony:
Got you. Okay.

Ashley:
It’ll just show for a personal credit card you’re opening up, but not for a business one. For every business credit card that I pull, if I had an inquiry, my credit would just ding-ding-ding because it would be so many inquiries going after it.

Tony:
We had several LLCs we didn’t have credit cards for. So, over the last three months, we’ve been opening up new ones, and I’m starting to lose track with all the different ones. So, I got to build out a Monday board that keeps all my credit cards in one spot so I can keep heads or tails of it. One thing, Ashley, we’ve mentioned a lot on the show that we haven’t defined yet is EIN.
So, when you’re applying for a personal credit card, or a loan, or mortgage or anything like that, you have to put your personal social security number. Same thing happens through your LLC, and your EIN is pretty much like the equivalent of your social security number. So, when you apply for a business credit card, mortgage, et cetera, they always want to see your EIN, and you have to apply for this, is it with the IRS?

Ashley:
Yeah. It’s irs.gov, and so I just Google irs.gov/EIN and it’ll come up. You’ll find in the Google.

Tony:
I’ve never applied for myself, Ash. Like I said, my attorneys always set up my LLCs for me. But you’re saying you can get your EIN in an hour?

Ashley:
Not even, they’ll literally, I’m saying by the time you do your online filing, you fill out everything on the state website, you can go and get your EIN. Once you have the LLC name, you can get your EIN number right away, and then you’ll get a letter that you need to save, and they’ll also email it to you. But the thing that sinks about the EIN letters is you can never get a copy of it.
So, make sure you save those because it was very, very difficult to actually get that original letter again. So, start your Google Drive, your entity name, and then in my entity name, I have a folder that says binder. Because when I first started doing LLCs for the investor I worked with, his attorney would have a physical black binder and it would be like the filing receipt, the articles of organization, the operating agreement, these little tabs.
So, I continuously did that until it was stacks of binders between me and this other investor. And I put it all into Google Drive, but it will say binder, and then we’ll have those folders, the EIN, any biennial statements that have been filed, tax returns, things like that. But you can keep all of these in a folder. And we actually go through this in the Real Estate Rookie boot camp, and we have a new one coming up soon in the end of January.
But we go through and it’s like a whole checklist I give everyone. And so, here’s the different folders that you should have to… like as a memory, okay, even if I’m not creating an LLC today, when I do create an LLC, then almost set check X as a checklist, like here’s the information that I need to save.
Along with the business credit card though, on the business side for Chase, I know on the personal side you can only have five credit cards open that are Chase credit cards. Do you know if that’s true or not for the business side?

Tony:
I don’t know. I only have one Chase business card right now, so I haven’t tried to max it out yet.

Ashley:
Yeah. So, those are just a couple things. You can go to the points guy or Aunt Kara on Instagram, and find all these travel-hacking people that can help you maximize those points with getting the business credit cards too. You guys know me, I like to get freaking the spreadsheets, and I have a spreadsheet tracker that will be like, okay, I need to hit this 5,000 minimum spend on this credit card by this date to get those bonus 100,000 points.

Tony:
I was so upset because we opened a business credit card over the summer and I just never used it. And then, I missed that window for… and it was a super small spend. It was like 5,000 bucks, which you will spend that on whatever, like setting up a property and yeah, totally forgot about it.
And then, when I went back to use a credit card because I hadn’t used it, they ended up reducing my limit down a thousand bucks or something like that. I’m like, “What can I do with that?” So, anyway, I love the idea of tracking it up front to make sure that you’re actually getting those bonuses.

Ashley:
And I think that’s a great point too, Tony, is you’re about the credit limit too. Being a new LLC, you may not get a huge credit limit. So, actually, when we started the property management company, I opened a new credit card for it, and I had two employee cards for the maintenance techs, and the limit I think was like $1,000, which for them doing maintenance and there was a lot of maintenance to get caught up, it was like I was paying it off every week.
And I made one huge payment because I knew that day they were charging a couple of fridges or a stove or something. And so, I made almost a prepayment on whatever. They ended up putting a hold on my account because the payment was so high and it wasn’t making a payment on the due date or anything for the statement. And they put a hold on the account for a week and they were penalizing us for paying our credit card.
And so, eventually, over time, I just had to be super diligent about basically, whatever they spent that day, paying it off until eventually, I think it was probably after a month or something, they increased the limit. But that’s something to be cautious of too and that it is easily, you can always call too and request for them to increase your credit. And I think sometimes you can even do it through their portals too, also.

Tony:
Just real quick, Ash, what’s your favorite business credit card?

Ashley:
The Chase business-

Tony:
The business Ink?

Ashley:
Yes, business Ink. Yeah.

Tony:
That’s my favorite business one. I have the Chase Sapphire Reserve as my personal one. I really love that one as well. Yeah. We recently got an AMEX business credit card, and this is my first time ever having anything American Express. And theirs is a little different where they don’t give you a spending limit. There’s no limit on your credit card, but it fluctuates based on how much you spend and if you spend more, you get a higher limit.
If you spend less, they bring your limit down. So, this is the card where I got the card and I think initially, I was able to spend up to 5,000 bucks or something when I first opened it. And because I hadn’t spent anything, I went to go charge something and then like, “Oh, your limit is only $1,000 now because you haven’t used it in the last 90 days.” So, that I’m not a fan of. So, I do like Chase because it’s just super clear, “Hey, your limit is whatever, X amount.”

Ashley:
Yeah. I do have the AMEX Delta one, which I do really like because with Delta, their points will get you better reward status with Delta so that anytime that I fly, me and anybody that’s flying with me, we’re automatically upgraded to Comfort Plus because of just using my credit card points and it gives me points on Delta, but it’s not like I actually have to spend those points to get the upgrades.
The points, just like the money, I guess if you spend so much in a year or whatever on your Delta credit card, it transfers over and gives you that status where you get that free upgrade every single time you fly, if available, of course. But yeah, a lot of different cool things that you can do with business credit cards. Let’s hop to our last question here and this one is from Jason Krivickas.
Hey, everybody. I have an insurance-related question I was hoping to get some insight on. I’m nearing the end of construction on an out-of-state duplex. I currently have it under an LLC, which I was planning to change once construction is complete, but I’m having a difficult time getting a policy quote with an umbrella over it.
If I put it in my personal name versus leaving it in the LLC, won’t I need an umbrella policy? Thanks in advance. Okay. So, I highly recommend that if you do put it in your personal name that you have an umbrella policy. But if he does choose to leave it in the LLC, you don’t technically need an umbrella policy. So, I think, Tony, first, let’s break down what an umbrella policy is and what it does.

Tony:
Yeah. So, we have an umbrella policy for most of our properties because again, a lot of ours are not in LLCs. And basically, an umbrella policy is exactly like it’s an umbrella where it just covers just you and any liability tied to you. So, I think we’ve got ours for two million bucks worth of liability and it’s relatively inexpensive.
I don’t remember the cost, but I remember it was so cheap, we were like, “Why wouldn’t we do this?” So, basically, now if someone comes to us and maybe they have an issue with this property, even though it’s not in an LLC before they can come after us personally, it would hit our umbrella policy first. So, basically, it’s like blanket liability protection for you.
They can be applied to different scenarios. And I think it also covers us in other instances, like if I got into a car accident, and something happened there or any liability against me personally, my umbrella policy could go against that as well. So, it seems like it was a good bang for your buck option for us.

Ashley:
And I think one of the differences between the actual protection of what an LLC provides and what an umbrella policy provides is that an LLC is saying that someone can’t sue you personally because it was the LLC that was at fault because this property, say someone slips on your sidewalk, and they sue your LLC, which is owned by your property, and your LLC landlord policy that’s on that property would pay out a settlement or whatever.
But you say it’s your only property in that LLC, and you have it mortgaged, there’s not a lot of equity in it, and your insurance company just settles with them, whatever, pays it. But if you have that property in your personal name, and someone goes to sue you, and you have a half a million dollar paid off house that you live in, when someone goes to see you, they can ask for more.
And so, what happens with the LLC is saying, you can’t sue me personally. So, no matter how much I have, you can’t sue me personally because what happened was this LLC was in this LLC’s entity. That’s the good kind of protection the LLC provides you if you do everything correct, just like we talked about in the beginning of the episode.
But if you do own that property in your personal name, you don’t have that LLC to say, no, you can’t sue me personally, even though it’s an investment property. What the umbrella policy does is it will cover up to $2 million, $1 million, whatever your policy is to fight you getting sued, to fight the claim.
So, say somebody is suing because they slipped and fell, the insurance company will pay up to, and this will all be in your agreement, but basically it’s saying, here’s $2 million to help you fight the lawsuit. Whether that’s them, which most likely would be, it was them settling with the person, and just giving them a payout, them paying the attorney fees, the legal fees to settle the lawsuit for you.
So, that’s the big difference is that the umbrella policy isn’t providing you protection, it’s literally just giving you the money to handle the problem and take care of the situation, I guess. And I just want to clarify that because those are two very different types of protection too. So, I guess, Tony, what is your stake on this? Do you think that he should put it in his personal name?
Sorry, Tony, I’m going to take this away real quick because I think one thing is I’m curious about as to why he’s having a difficult time getting a policy, an umbrella policy “on himself.” That’s what I find is hard because I would think no matter what, I would say go talk to insurance brokers first, and go, and find a broker who will go, and shop the insurance to different companies for you and get that umbrella policy. Unless maybe you have a lot of claims history in your past for other things, and maybe that’s why you can’t get the umbrella policy and it’s expensive.

Tony:
I was just going to say, he says I currently have it under an LLC, so I guess I’m just missing what his motivation would be to even pull it out of the LLC. If it’s already there and you’ve already got that protection, why put it back into your personal name and get the umbrella?

Ashley:
Maybe because he’s doing a construction loan or maybe even hard money, private money now, and wants to go and refinance it in his personal name to get that 30-year fixed, that too.

Tony:
Yeah, maybe the better rate. Yeah. To Ashley’s point, I think I just shop around. There’s so many insurance brokers out there, go in BiggerPockets, search in the forums, you’ll find someone, whatever city or market you’re in, see if you can find someone local to that area, get a recommendation. But I’d say you just got to shake some more hands, knock on some more doors, and I’m sure you’ll find someone, Jason.

Ashley:
And 100% to his last question, 100%, I would say if you’re putting a property and personal name, get that umbrella policy. It’s usually very inexpensive. Unless you have a lot of claims that people have sued you in your past, then maybe it isn’t going to be cheap for you, but it’s very inexpensive and it’ll help you sleep at night. So, Tony, speaking of sleeping at night, before we wrap up this week’s episode, how is baby girl, and have you been sleeping at night?

Tony:
Yeah. She’s doing pretty good. Last night, she had her last feed around 11:00. She had her last bottle around 11:00, and I got up this morning at 6:30 and she was still asleep. She’s doing pretty good right now.

Ashley:
Yeah. Yeah. That’s awesome. Well, my son woke up at 10:30. I was passed out and he wanted a drink, I get him his drink, and then me and him stayed up until about midnight watching the storm outside and the snow. So, I did not get a lot of sleep that we started watching Christmas Vacation and we finally fell asleep probably shortly after midnight,

Tony:
But hey, that’s what this time of year is about, right? Cuddling up, watching some movies, staying up late.

Ashley:
Yeah. It was a great little memory of us, I felt like we were in a snow globe. Okay. Well, thank you guys so much for listening to this week’s Rookie reply. If you have a question that you would answered, please go to biggerpockets.com/reply. You can also check out the show description to find out where to see Tony and I on social media.
You can also connect with us there and don’t forget to ask your questions in the BiggerPockets forums too. There are a wealth of knowledge in that community in the forum, so make sure you go network, and connect with other investors, and we’ll see you, you guys, next time.

How is 2024 looking for investors in the short-term rental (STR) market? 

Many economic factors affect the STR market, from occupancy rates in specific markets to ever-changing rules and regulations of the short-term rental sector. As part of our State of Real Estate Investing Report, we dive deeper into all of these factors one by one.

Daily Rate Outlook

Every STR investor bases the profitability of an STR on how much they can get for their rental per night. According to the report, the average daily rate prognosis for 2024 is, at the very least, flat but likely trending toward growth. 

This is because the economy overall is showing signs of stabilizing. Macroeconomic factors play into this, too: With oil prices and currency exchange rates showing signs of evening out, STR investors can look forward to greater predictability in daily rates. 

Julie Brinkman, CEO of STR management platform Beyond, predicts, ‘‘If the vacation rental property manager and host are systematically staying on top of demand, they will […] see flat to higher average daily rates (ADRs) year over year.’’

Vacancy

This brings us to the next major factor in STR investment success: vacancy rates. Gauging demand correctly is crucial for any STR investor; unexpectedly high vacancy rates can spell disaster. What can investors expect on this front in 2024? 

Brinkman believes that increased occupancy is ‘‘certain’’ for hosts and landlords who have properties in in-demand areas. However, other experts are advising STR investors to temper their expectations. Beyond’s director of revenue management, Jeffrey Breece, predicts an ‘‘incredibly average’’ year in terms of STR demand. 

In a sense, though, this averageness may well be the most valuable thing about 2024: It will help landlords reestablish what normal vacancy rates look like post-pandemic. Breece believes that 2024 will be ‘‘the new baseline year,’’ replacing 2019, as pent-up demand for travel from the pandemic finally dissipates. Therefore, investors new to the STR market should use 2024 as a blueprint for what they can expect in the coming years. 

One thing STR investors don’t need to worry about so much is any further decline in occupancy rates. David Kelso, co-founder and CTO of Beyond, believes that the 2023 situation in which supply outstripped demand for vacation rentals was ‘‘an anomaly’’ and won’t be repeated in 2024. Even if demand for STRs doesn’t grow massively next year, the supply-demand balance will likely stabilize.

Best Markets 

The best STR markets, as ever, are markets that offer a healthy cap rate—that is, the annualized rate of return on the current property value as related to all the expenses associated with the investment. Investors should look for locations that are a little off the beaten track—that is, outside of major cities that already offer a ton of accommodation options.

In the U.S., the current best STR markets that offer great cap rates are located in Virginia and Florida. Classy small beach towns and villages like Sandbridge, Virginia, and Okaloosa Island, Florida, have affordable properties that translate into high average daily rates. 

AI Integrations

Artificial intelligence (AI) is an unstoppable trend in the STR market. AI tools can be very useful to STR investors because AI algorithms are capable of processing and analyzing vital data, including the performance of different property types in different locations and location-specific guest preferences. With the help of AI-powered data management, hosts can get a better idea of what guests are looking for, down to details like bed preferences. 

The other area where AI tools will become even more useful is marketing. Caitlin Cassady, vice president of marketing at Beyond, explains that new data-driven tools can help hosts make their STRs more attractive by promoting events in their area or by ‘‘highlighting their 5-star reviews to increase booking conversion.’’

On Airbnb and VRBO, new AI tools can use algorithm-generated data to suggest personalized options to guests searching for their next vacation rental.

Laws and Regulations  

Will cities continue to crack down on STRs?

?The short answer is yes. The tightening of rules and regulations in the STR sector is a known issue, and experts agree that it’s not going away in 2024. Maria Flores Portillo, Beyond’s managing director of EMEA, predicts that ‘‘regulations will continue to throw challenges, especially (but not exclusively) in urban markets.’’ 

Portillo is cautiously optimistic for the longer term, explaining that ‘‘Whilst regulation is unavoidable, it is possible to create a sustainable framework that legitimizes the short-term rental industry as the beneficial economic sector for society that it has become.’’ This will require robust legislative action, however, and a reining in of lobbyism by the hotel industry. 

Beyond’s CEO Brinkman shares this optimism for the longer-term possibilities of STR investors coming together ‘‘to tell the right story—about the economic benefit STRs bring to communities.’’ In the shorter term, however, urban areas will continue to ‘‘come under regulation pressure.’’

Airbnb Updates

The Airbnb roadmap is a new tool introduced by Airbnb this summer, designed to address a long-term issue Airbnb customers have had with the platform: inaccurate listing descriptions. The roadmap expands existing property types to seven, offering customers a better idea of what they can expect from a booking. 

The company is also overhauling its review system. Airbnb CEO Brian Chesky said in an interview with TechCrunch that Airbnb homes ‘‘are one of a kind—that’s a strength [for us], but their reliability is the big question. We can’t inspect every home, and we don’t want to try to inspect every home. So we’re just going to be investing a lot more into a review and reputation system.’’ 

Properties that score especially highly will get a Guest Favorite badge. Guest Favorite badges will be reviewed on a weekly basis, rather than the Superhost badges that are reviewed quarterly. The idea is to make hosts more accountable. 

Will this new system hurt or harm investors? Because Airbnb is simultaneously updating its features for hosts, allowing them to add more and better detail about their listings, the new roadmap is ultimately an opportunity to better market an Airbnb property, increasing occupancy and revenue. 

More from BiggerPockets: 2024 State of Real Estate Investing Report

After more than a decade of clearly favorable investing conditions, market dynamics have shifted. Conditions for investment are now more nuanced, and more uncertain. Download the 2024 State of Real Estate Investing report written by Dave Meyer, to find out which strategies and tactics are best suited to win in 2024. 

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

Mindy:
Welcome to the BiggerPockets Money podcast, my dear listeners, where we, today, are interviewing Mari Llewellyn, who went from weighing 240 pounds and not knowing what she wanted to do with her life, to losing 90 pounds and building a multimillion-dollar business. Hello, hello, hello. My name is Mindy Jensen, and joining me today is my senior producer, Kailyn Hope Bennett.

Kailyn:
Hi, Mindy. It’s so good to be here again with you.

Mindy:
I’m so excited to have you stepping into Scott’s shoes today. Today, we are talking to Mari Llewellyn and she is such a great storyteller. We’re going to hear the journey of her weight-loss story and how she parlayed that into this giant business that she stumbled onto with really no plan.

Kailyn:
I think to say Mari is a tour de force is underplaying her. She’s 29 years old, killing the game, owns a multimillion-dollar business in the supplement and fitness industry. I think that this is a great episode for any entrepreneur, anyone interested in starting a business. You’re going to hear so many good tips, tricks, nuggets from Mari about creating a successful business, utilizing the social media economy.

Mindy:
She has so much information to share. I don’t want to wait. Without further ado, let’s bring in Mari Llewellyn. Mari Llewellyn was recently named to Forbes 30 under 30 list for the business she and her husband, Greg, founded called Bloom Nutrition. Mari is also the founder of the app Strength by Mari and the host of the hit podcast, Pursuit of Wellness. Mari, welcome to the BiggerPockets Money podcast. I’m so excited to talk to you today.

Mari:
Thank you, guys, for having me. I really appreciate it.

Mindy:
Mari, let’s start the show with a bit of your background. Tell us a little bit about yourself and why you decided to start a nutrition company.

Mari:
How far back do we want to go? I’ll give you a brief overview. I was born in the UK and I moved around a lot as a child. My dad works for the United Nations, so I lived in the UK, Switzerland, back in the UK, New York. I went to school in Philly. I’ve lived in Colorado. Now, I live in California. I’ve been all over the map. Business was never something that I thought was for me. Particularly, I’m not strong with numbers, let’s say. I never thought that it was going to be my thing, but I am someone who’s really creative. I love sharing, I love communicating, I love branding. It’s funny how things ended up working out. I underwent a pretty dramatic fitness journey of my own, and I can go into details of that later. I ended up losing 90 pounds and completely fell in love with health and fitness and also, just optimizing my mind, my body, my life in general.
During the fitness journey, I struggled finding supplements that were for me, for a female who was new to fitness. I wanted something approachable, friendly, fun, easy to incorporate in my routine with great ingredients. I was dating my now husband, Greg, who is incredibly entrepreneurial, very numbers driven, thank goodness, and loves marketing. Together, we were the perfect pair and we put our heads together and started sampling for Bloom in 2018. We did everything ourselves. Not the formulation. We worked with a manufacturer for the formulation. The labels, the customer service, the social media, everything top to bottom was us. We really learned a ton about the business itself. Launched in January of 2019 with three pre-workout flavors. Then shortly after, released our Greens, which was our home run, and now we are known as a greens company. It’s been a pretty wild journey.

Kailyn:
Just so our audience is well aware, the Greens went completely viral. This is actually how I first as a producer learned about Mari. This is a Kailyn endorsement, this isn’t a show endorsement. I actually use the product and it’s a really great micronutrient dense powder you put in your drink every day. Mari, before we really step into the Greens and Bloom nutrition empire, I’d like to take another step back and talk about your time growing up. What was your relationship like with money in your household?

Mari:
Money wasn’t something that was spoken about particularly in my household. I don’t know if it’s because I grew up in the UK or if it was just my family’s values. I personally find even when I go back to the UK or Europe now, I want to talk about my career. I want to talk about my job, I want to talk about my brand. I talk about money more openly, I would say, than my family does. I knew nothing about money. I actually would say I had a little bit of a negative relationship with money overall, because I didn’t understand it. I didn’t know how to save. I didn’t know the value of money. I didn’t know what my parents’ salaries were. The only memory I have of thinking about money was when I kept running out of it in college and my dad yelling at me over and over again.
The first time I really developed my own relationship with money was when I hit rock bottom at college. That was part of my fitness journey, just having this awful, awful experience. I was unhealthy mentally and physically, and I was just sick of relying on other people for money and feeling, I don’t know. I had this very negative relationship with money, and for the first time I wanted to be able to earn it on my own and feel good about it. That’s when I got a front desk job at Orangetheory Fitness, and I wasn’t making a lot. I mean, it was a commission-based job, and I was really bad at selling the program, so I didn’t do very well. It was the first time that I got a proper paycheck and felt fully responsible and I wasn’t getting yelled at for going over my balance or whatever it may be.
Overall, I feel like I had very little education and knowledge around money. Then I had a very negative relationship with money because I kept overspending and not understanding how I was doing so. Also, not understanding how much I needed to live on a daily basis and where budgeting should come in. Now, it’s funny, because I went from there to where I am now quite quickly. My husband’s parents are very money literate. It’s something that they talk about a lot in the household. They talk about business, they talk about money. Anything that I’ve learned as an adult has been through them and through my business, but it’s still something that I’m learning. It doesn’t come to me very naturally. I hope that answered the question.

Kailyn:
I think that’s a really common thing a lot of people go through, myself included as young adults. Because financial literacy wasn’t taught in the household and it wasn’t a major theme running through our education system or even our friend circles, I think money is a really taboo thing to talk about. Sometimes it feels like you have it or you don’t and there’s a secret code in between that we’re all trying to debunk.

Mindy:
You’re starting from the same place that everybody else is.

Mari:
That’s good to hear, honestly. Because it is something that you internalize. For years, I felt a little ashamed of the lack of knowledge that I have. I had a meeting with our account managers yesterday, and a lot of the lingo and verbiage does go over my head, but I’ve gotten so much more comfortable as an adult asking questions. I’m okay with looking stupid now. I don’t care. I want to understand what’s happening. I don’t want to feel like I’m drowning in information that I don’t know. Because at the end of the day, I’m the one earning my money. I want to know where it’s going and what’s happening.

Kailyn:
Mari, really the key to your entrepreneurship journey and the success of your business was that weight loss journey. I’d really like to go in and dig into that story. What did that process look like and when did you start posting about it on social media?

Mari:
As I mentioned before in college, I was actually a semester away from graduating. I really hit the lowest point in my life. I had always struggled with mental health. My depression got way worse at college. I feel like a lot of times we go to college and we end up partying and drinking, and those things can really exasperate underlying problems. It really allowed me to see some of the demons I’d never really dealt with. Around this time, I was diagnosed with borderline personality disorder. I was put on a number of medications, antianxiety, antidepressant, antipsychotics. Just a heavy dose of medication. It had a massive impact on my body, my mind.
I felt completely checked out of reality. I was essentially in a dissociated state for a year. It led to me failing every class at school, barely being able to get out of bed, having a bad relationship with food, mistreating myself. I lost a lot of the relationships I had. It was a really detrimental time for me. I ended up moving back home with my dad, which for me was like, I was ashamed. I felt I don’t really have a job or a goal here. I don’t even have my degree right now. It was a huge reality check and this moment where I was like, the only person I have to blame here is really me and I have to take full responsibility for what’s going on. I’m not recommending anyone do this. I’m not a doctor. I came fully off all of my medication just so I could feel again.
I lost all the high, highs, I lost all the low, lows. I wanted to gain back my personality. In doing so, I got a lot more clarity on where my life was at and I wanted to get some control. My boyfriend, now husband, Greg, has been bodybuilding his whole life. He’s obsessed. It’s his passion. I decided I wanted to take my first step in being healthier. Really, for me, it was more about the mental of it all than the physical, although I was heavier than I’d ever been. I was about 245 pounds at this point. I reached out to Greg and I was like, I’m going to do this. I remember the first day of my journey, I essentially recreated his breakfast, which was all these eggs and oatmeal and blue. It was like this bodybuilder breakfast.

Kailyn:
What, like 120 grams of protein for your bodybuilder breakfast?

Mari:
Yes. Looking back, maybe I didn’t need to be eating that much. I was on the path to figuring out what worked well for me. Before that, I was eating two giant muffins, a giant iced coffee with sugar. All of these things were really triggering my pre-existing mood disorder. The sugar was elevating my blood sugar levels, the caffeine. None of those things are helpful when you already are struggling with mood. Just by swapping out my food for whole nutrient dense foods, getting in more healthy fats, that really set me up for a better base point. Then in terms of exercise, I started going on walks every day. That was really just the simple baby step that I took. Because when you go from having little to no exercise routine, I think a lot of people jump to, I need to be in the gym every single day. I need a workout plan, and they do too much. Then they end up feeling overwhelmed and backing out of it completely.
I’m a huge fan of a baby step approach, because I think it really builds your confidence. I always say you build confidence by keeping your promises every day. If you can just get out the door and go on a walk and that’s keeping your own promise, then you can get to the next level. From there, I started going to the gym just 30 minutes here and there. Even if it wasn’t the best workout, I would just make sure I got myself in there. I ended up completely falling in love with lifting weights and eating well and feeling good, and it really healed me. I think I was able to become the strong person I wanted to be and really develop a work ethic. Because I think the discipline you have in the gym really can be translated to real life as well. That had a massive impact on me, and I don’t think I’d be here right now if I didn’t go through that.

Kailyn:
I completely agree. I’ve seen that in my own fitness journey, lifting journey. I think that the discipline and the mindset you get in the gym is so translatable to every other part of your life. If you’re keeping your promises to yourself, if you’re pushing yourself, if you’re getting in there every day, you’re flexing to that last rep, you’re going up in weight or up in reps every single time. It’s just so easy to have that compound and move to other parts of your life just to keep on pushing.

Mari:
I would say 100%. I feel like it sounds cheesy, but doing that extra last rep and pushing until you can’t anymore, really going till failure. Once you go through that, you realize you can do that with absolutely everything. It’s just about that consistency and being willing to get through the pain. Fitness completely changed my life. I feel like it was during that time I got the job at Orangetheory Fitness and I ended up going back to school and getting my degree. It really showed me that I’m capable of much more than I thought. I really feel like that was the onset to my entrepreneurship journey.

Kailyn:
I’ve actually been reading this book called The Power of Discipline. Through that, they talk about why Navy SEALs are so successful. It’s because when you hit that point of failure in your body, when you’re running really hard or when you’re lifting really hard or physically or mentally fatigued, you’re actually only at 40% of your body’s full capability. What they’ve learned is when you push past that 40% is when you’re most successful and why you can keep going. What I’m hearing is that’s actually what the gym taught you. It taught you to push past that mental barrier of your body only being capable of that 40% or in my own finished journey, probably less until I started pushing past that. Mari, I’d like to go ahead and shift gears a little bit and really dive into social media since that’s such a big part of your story and your success. When did you start posting on social media about your fitness journey?

Mari:
I wasn’t an avid social media user during my journey. Also, I think because I was so just insecure with who I was, I wasn’t sharing. I didn’t post my first photo until November of 2017. I was definitely following other fitness influences, I remember, and definitely using their programs and watching what they were doing. I didn’t post my before and after until November, and I was really nervous. I had like 900 followers and they were all from college or people of my personal life, and I was so nervous about what they would think. I remember putting this post up and it exploding way more than I could have anticipated. This was the time on social media where things were organically growing and people were getting followers quite quickly. This post got a lot more attention than I expected, and it was being re-posted on much larger fitness pages, fitness pages with a ton of followers. People were re-posting it. I remember my phone just exploding, exploding, exploding.
I was like, “Oh, my gosh. What is happening?” I still remember being in my car seeing this happen. Quite quickly I had tons of DMs asking me, “What workout program did you use? What nutrition plan did you use? Tell us what you did, et cetera, et cetera.” Of course, I’d just been pretty much doing what Greg taught me or whatever plan I’d put together for myself. That was the start of our business. It happened pretty organically because people were asking me for products. I was so passionate about this thing. I felt like I had this secret sauce for happiness because I was like, “Wow, I just completely changed my life myself just through this thing.” It was hard, but I wanted to share it because I felt like so many people must be in the position I was in. That’s when we made our first ever workout plan for $5. It was a PDF workout guide. We would manually email it to people and they would PayPal us $5. It was not a sustainable business plan. I’d be on my phone all day sending the plan. That was the start of everything.

Mindy:
First of all, I love that you were on your phone emailing this to everybody. Because when you start a business and it just happens and you don’t really know what you don’t know, so you’re just doing what you know. You got the information to these people that they paid you for, and that’s ultimately the bottom line. You got what they needed, so that’s great. I’m assuming that you found another way to do this eventually because you have time to talk to us instead of just sitting there emailing 500 people.

Mari:
We took it really seriously. We were on top of our game, Greg and I. Luckily, I had Greg with me, so he was very helpful. Ultimately, we figured out how to make a website because I was like, this is not really working. Got a website, made more guides. This business was called Mari Fitness at the time. We sold a lot of these guides, way more than we anticipated. The PDF guide business back in 2017 was booming. That was the big thing to do. I still think it’s a great way to start a business because there’s no overhead. We made the PDF ourselves. We literally just went to Barnes and Noble and wrote everything out, and it’s automated. Well, it should be automated. It was perfect. We really built the capital we needed to then make a physical product.
Our first physical product was a resistance band. It was a fabric booty band, which there weren’t many of those back then. The first 900 we made, which it was difficult to find a manufacturer who would work with us because not a lot of people took us seriously. We were so young. Clearly, had no idea what we were doing. We found a manufacturer in Pakistan and made 900. We ended up hand-packing and shipping them ourselves out of my dad’s attic. I remember I wrote a note in each one. That was the start of physical products. That band did really well. We obviously ended up getting a warehouse to ship them out. All of this work was us building up capital to then start Bloom, but also just getting a lot of experience and understanding of how this was going to work.

Mindy:
Was the goal to start a nutrition company and you did that by selling these physical products just to generate the income for it, or did you always wanted to have the nutrition company and the physical products company?

Mari:
To be honest with you, there was no plan. We were making things that I wanted and that the audience wanted. I wish I could say, oh yeah, we had this big grand plan for Bloom. No, not really. We just were like, I don’t really feel like there’s any supplements that I like. I’d come home with all these supplements that were definitely marketed to men. There was a lot of caffeine in them, a lot of weird stuff going on. I just didn’t feel like anything was for me. I was like, I want to make pre-workout that I want to take. That was really how Bloom started.
It was helpful that we’d had this prior business experience and that we’d gotten, neither of us had any money, we’d just graduated college. We were generating money through the PDFs, through the bands. That is now the Strength app. Mari Fitness ultimately became the Strength app. Everything is much more evolved now. The platform is easier to use, there’s videos. Bloom sampling began in 2018. To start a supplement company, it does take a lot of money. I definitely don’t think we would’ve been able to had we not done Mari Fitness.

Mindy:
Going back to this picture that you posted on social media. I’ve seen some variation of this picture where you had your before I lost weight and my after I lost weight picture right next to each other. Why do you think people identified so much with your specific story and why do you think they were so hungry for the information that you were sharing versus somebody else’s share?

Mari:
Great question. Part of me is like, I don’t know. I’m not sure why people respond so well to that. People love before and afters, like a skin before and after or a weight loss before and after always gets a lot of attention. I’m not sure what about the photo it was. In terms of what I was sharing, I always had this very transparent approach to fitness. I feel like back then, a lot of it was very airbrushed. A lot of the people sharing had been fit for a long time. They didn’t have the same story I had. I feel like people liked the fact that I’d been in the same place that they were in.
I think when you’ve been there and things have been really dark for you and you’ve had to push through really hard times, you want to feel understood and seen. I feel like me sharing every piece of my journey, the ups, the downs. When I started sharing, I wasn’t necessarily ripped or lean. I’d lost weight, but I wasn’t anywhere near where I am now or where I have been. I was coming from this imperfect place, still on my journey, still struggling, still giving advice. I think people really resonated with the relatability of it, if that’s my guess.

Kailyn:
I think that’s 100% why it went viral. I felt like when your before and after photo came out, it was just shared everywhere. It was just such wildfire that caught. I remember looking at my search page and I kept going, there’s that blonde girl again who did a really great job on a fitness journey. Then that blonde girl turned into, there’s Mari, and she’s posting really great content. What I liked about it is that it really felt like anyone could do it. I think that, that was the catalyst of to why you had such exponential growth after posting that photo. Mari, I’d like to shift a little bit and really dig into the business side of Bloom. How did you and Greg go about delegating roles early on in the business?

Mari:
Such a good question. I feel like that has taken years to figure out. At the beginning, we were just doing it all. We definitely fell into roles based on skillset. I definitely was always more front facing. I liked sharing the story. I loved connecting with the community. I felt like I could speak well and understand what people wanted to hear or what I wanted to share. Then I also loved the label creation, the marketing design. I would always work with graphic designers and give them my vision or the way I wanted the website to look. Greg always fell more into, how much inventory do we need? How much is this going to cost? All the stuff he does, managing people, that was more his skillset as well. At the beginning, it was very much like, customer service was the biggest undertaking. We would be on the computer all day responding to people. We ended up splitting that half-and-half because it was so insane.
It is interesting looking back, trying to wrap my head around how we did it all. I don’t think we left the house for two years, to be honest. Then starting to hire as soon as we could. The first person we got was a head of customer service who’s still with us today, like four years later. She’s amazing. As the business has evolved, it’s gotten very clear who does what. Greg is the CEO of Bloom, he manages the whole team. He’s also really strong with marketing, so he’s basically our CMO as well. I was essentially our chief of brand up until recently. We’ve now hired a head of brand who’s amazing. I’m still in every creative meeting. I talk about retail displays, influencer collabs. Things have definitely changed a lot over the years, but I still remain in a pretty creative branding role, whereas Greg is still doing what he loves. For a while at the beginning, you just need to do everything.

Kailyn:
Absolutely. I think that, that is the key to being an entrepreneur and a founder. I think I read somewhere Mari that you and Greg didn’t really take a salary and you just put every penny back into the business when you were getting it going.

Mari:
We were not taking a salary at the beginning. Ever since we did the PDF guides, our mindset was we’re going to put everything back in. That was really Greg. I have to give Greg credit for that because I didn’t really understand how much money was needed. One thing Greg was really good at, at the beginning of Bloom was, okay, we’re not going to take a salary. We’re going to put this all back in and generate as much marketing as we can because we just need to get this in front of as many people as we can. We have actually been more profitable. We’ve been profitable from the beginning, I’m pretty sure, which is interesting because not many people can say that as a startup.
I think we had a unique start because we already had a very strong base of customers who had been buying from us already. When the products came out, there was this initial surge of interest and the product sold out right away upon the first launch, and it just kept getting bigger and bigger. There was a period of time where we were really figuring out, what do they want next? That’s where the Greens came in right before COVID, we did pre-workout, we did protein, we did EAAs. We’re a bit more like of a gym-focused brand, and the Greens were what really took off. We are 100% self-owned. Greg and I are the only owners of Bloom. We’re self-funded from the beginning.

Kailyn:
You’ve never taken on an investor like venture capital or anything?

Mari:
No.

Kailyn:
That’s amazing. I just want to make a note for our audience, that’s pretty rare, a company this big to have two owners that own 100% of their business.

Mari:
Thank you. I really appreciate that. It has been great because we’ve been able to move and pivot as quickly as we need to and keep the brand what we want to keep it. I mean, it has such a strong story behind it and such a strong community. It has been a wonderful journey. Definitely, a lot of pressure. That is the con of being 100% self-funded because all of our money was in Bloom. Anytime something went wrong, it was like panic mode at the beginning.

Mindy:
A moment ago, you said that you weren’t taking any salary, you were just plowing everything back into the business. Where were you generating income to live off of? Did you have outside jobs or what were you doing?

Mari:
We were still using the capital from the fitness guides. I still had a very profitable workout app business at that point. Anything we were making from the workout guides we were using for our personal needs, because that had pretty much no overhead. The guides just exited online and people were buying them and it was still a very profitable business. Then eventually, that became the app, which is also very helpful to have another business or a side business, which is why I love PDF guides, I love apps. It was still something I was really passionate about, showing my workouts every day, building more guides. That’s what we use for our personal life, but also, in a way to fund the creation of Bloom.

Mindy:
Do you still keep those two companies separate?

Mari:
Yes, we do.

Kailyn:
Mari, now that we’ve gotten into the nitty-gritty of the business side of how you funded it, I want to get into the development side, which I think is something when we talk to founders that we don’t get to really dive into enough. What was it like working with food sciences to develop your Greens powder, which is that micronutrient dense powder that has gone pretty viral, hitting Target and Walmart and so on?

Mari:
I don’t want to say easy, but to come up with products back then was easy because it was exactly what I wanted. I struggled getting in enough veggies every day. I’m like a meat gal. I’m definitely a carnivore in that way. I wanted to be getting in all my nutrients and I wanted an all-in-one supplement, one scoop that had everything I needed in there. All the nutrients, all the goodies, helped with gut health. I’ve always been obsessed with gut health. I think it affects absolutely everything. I feel like I’ve always struggled with my skin. I’ve always had various things, and it all has to do with the gut. I wanted it to be very gut-friendly, but also taste really good. Any other greens products I’d ever tried tasted like grass, garbage, whatever you want to call it. When we started sampling, we had a great manufacturer in New York.
Greg and I lived in New York, and we wanted a local manufacturer that we could go and visit. We would go, we’d have our white coats on, our white hats on and try different things. I’ve always been really obsessed with nutrition and ingredients. I had a really good idea of what I wanted in there and what I didn’t want in there. The scientists at the manufacturer were able to help me create a formula that I loved. It was the taste that was really challenging. I wanted it to taste really good, but I didn’t want to have any sugar or any weird ingredients in there. That’s what took a lot of sampling. I remember we landed on the one that I felt like tasted amazing. I took it to a vacation, Greg and I went on and I was kind of trying it out, posting my experience, and it ended up being the trip I got engaged to Greg.
We were eating a lot, drinking a lot, and I was having these greens, and I really felt so much better than I normally would because I don’t normally drink that much. I felt like my hangover was better. I felt like my bloat was better. I remember being like, this product is awesome. I feel like everyone can relate to this. As I was posting, that’s what’s so cool about social media, you really get that live feedback constantly. People were freaking out over the greens and they wanted to try it. That’s how we knew we hit a home run once we launched it. This is where the self-funded part comes in, but we had a hard time keeping enough in stock because we obviously, it’s very expensive to buy all of this product. Let’s say we had 5,000 units sold out. Now we need 10,000 units. We basically couldn’t afford to keep it in stock long enough. People got really upset with us that it was constantly sold out.

Kailyn:
I know that there were growing pains for being self-funded of selling out, but I think this was actually a masterclass in marketing because you guys framed it as, this is so viral, it keeps selling out. I think that actually helped generate the buzz around the greens and made it continue to sell out in the future.

Mari:
In hindsight, it created a lot of hype around the product because everyone was like, why does this thing keep selling out? What’s so great about it? That did help.

Mindy:
Bloom was originally tied to your personal brand. Was there a point when you realized that you couldn’t always be the face of the brand? I think this is an issue that a lot of creators start off with and then maybe have to realize it’s not sustainable for Mari to do everything.

Mari:
Such a good question. I was very much the face of the brand. It was almost like Bloom was just Mari’s supplement company, which is so crazy because now, a majority of people buying Bloom have no idea who I am, which is great. That was always the goal. We realized, I think a couple of years in where it was like, we don’t want it to be reliant on me posting in order to make a sale. That was how it was at the beginning. It was like, if we wanted to boost sales, I had to post. I had to get on Instagram and talk about it. It was very effective. I mean, we used to have crazy days of revenue back then. Now, we have much more consistent daily revenue. Back then, it was these massive spikes when we would do sales or restocks or whatever it may be, and I was the one filming the Shopify, showing the dots popping up everywhere.
It was very much coming from me. I never want Bloom, obviously, it started with my story, but I want Bloom to be for everyone. Our whole thing is being accessible, friendly, fun, approachable. There’s so many women now who represent Bloom, whether it’s a mom with a bunch of kids and wants to stay healthy, or a nurse who’s working through the night. I love this idea that we can lift up other female creators with their own version of my story, basically. Everyone has their own story. I feel like the relatability factor of Bloom only shines when it’s represented by a lot of different people and not just me. It definitely was an intentional shift. We didn’t call it Mari’s Supplement company for a reason. I pop up every now and again in the marketing, and I still love to go tell the story of Bloom and represent Bloom. I wouldn’t say anymore that I’m the only face, which is kind of crazy.

Kailyn:
Mari, I think the question on everybody’s mind now is how big is Bloom today? How many people are you managing? How are you expanding? What’s going on with you guys today?

Mari:
We have about, I want to say we have like 55 employees in office and potentially 15 more out there in the world remote. A lot of team members. We work with a lot of different people. It’s getting big. We’re in Target now. We’re in Walmart. We’re exploring other retailers at the moment. The brand has grown into its own ecosystem, I guess you could say, which is wild and really, really exciting.

Kailyn:
How does that feel emotionally for you as an entrepreneur seeing this business continue to expand?

Mari:
That’s an interesting question. I’ve been through different stages with it for a while. I’d say about two years ago, I had a little bit of a grieving period when I had to let go control. I was like, this business is my child. That’s genuinely how I felt. I had a hard time handing it off to other people, and it was really tough. I was really, really sad for a while. Now, I’m at the point where I get so much joy seeing young women. Most of our employees are under the age of 30. I mean, so many of them have stepped into their careers. They’re managing teams. One example, we had an influencer management intern come in. She was 23 years old when she arrived, and now she’s the head of the entire program. She’s 15 people under her.
We are known for our influencer program, thanks to her. It’s been incredible to watch other people step into themselves and also, just see how amazing Bloom can be. I feel like I’m doing exactly what I am supposed to be doing. The podcast, I have a podcast now called Pursuit of Wellness. It has been an extension of me and my brand, but also, Bloom. Getting to sit down with experts, expand my knowledge, have great conversations, get the story out there, and also, be there to support the Bloom team when they need. I feel like I’m doing exactly what I’m supposed to be doing. It’s pretty amazing.

Mindy:
What advice would you give other young entrepreneurs who are trying to utilize social media to grow their own businesses?

Mari:
My number one piece of advice is to just start. I know that sounds simple, but so many people come to me and say they have this idea and they’ve been thinking about starting a YouTube channel, and maybe they’ll post this, maybe they’ll post that. There’s never a perfect moment. You don’t have to wait for permission, just put the post up, even if it’s not perfect. I look back now on our first labels and I’m like, oh, wow. I’m shocked anyone bought that, frankly, because they were not good. I’m so happy that we took that leap and did it anyway, because it’s never going to be exactly what you want it to be right off the bat. It’s better to just get it done, start posting, start sharing, and give yourself permission. You are just as qualified as anyone else. You don’t need to have a business degree to start a business, in my opinion. You just need to be passionate and believe in your mission, so just start.

Mindy:
Perfection is the enemy of progress.

Mari:
I agree with that 100%. I feel like too many people spend time just waiting for something, for someone to tell them that they can do it.

Kailyn:
All right, Marie, before we get out of here, you actually do something really fun on your podcast where you do a rapid-fire question segment with your guests. We know we’re a business and finance podcast for the most part, but we thought it’d be really fun for our audience to have some rapid-fire health questions that you could answer for us for those who are interested in that side of things and want to get going on a health journey.

Mari:
Let’s go.

Kailyn:
Okay, Marie, the first question I have for you is, what is the best exercise to start a fitness journey with?

Mari:
I mean, there isn’t one exercise. I’d say pick up some weights.

Kailyn:
What is your favorite healthy food?

Mari:
Steak.

Mindy:
Your favorite supplement besides the ones you make at Bloom?

Mari:
That’s hard. Obviously, it’s going to be greens. Other than that, magnesium.

Kailyn:
Cold plunge, yay, or nay?

Mari:
Big yay for me. Life-changing.

Mindy:
I will let you do all the cold plunges for me. Come visit, I’ve got a pool in my backyard.

Kailyn:
The last one we have for you is what is the best advice you’ve received that’s helped you on your fitness journey?

Mari:
I think consistency is key. It’s less about having a perfect day and more about just showing up.

Mindy:
I love that.

Kailyn:
All right, Marie, well, thank you so much for your time today. We’re so grateful to have had you on the show. If our audience wants to learn a little bit more about you or your app or Bloom Nutrition, what’s the best place to do that?

Mari:
Thank you, guys, so much for having me. Great conversation. They can find me on Instagram at Marie Llewellyn, M-A-R-I, L-L-E-W-E-L-L-Y-N. They can listen to the podcast at the Pursuit of Wellness on Spotify, Apple, wherever they listen to podcasts. They can check out Bloom at www.bloomnu.com. We also sell on Amazon, and the Strength app is just the strengthapp.com, strengthappbymari.com. I think that’s it.

Mindy:
Bloomnu is bloom N-U dot com?

Mari:
Yes. Thanks for pointing that out.

Mindy:
Awesome. Marie, this was a delightful conversation. Thank you so much for your time today, and we will talk to you soon.

Mari:
Thank you, guys. Have a great day.

Mindy:
Thanks. You too. Bye-Bye. Holy cats. Kailyn, that was Mari Llewellyn and that was really flipping amazing. I love her story. I love how she is so honest. We didn’t have a plan. We were emailing these PDFs to everybody because that’s all we knew what to do. I love her honesty because really, when you start a business and you don’t really have a plan to start that business, it just happens. You do what you need to do to get it done. I love the way that she has figured it out as she goes along.

Kailyn:
I love that too. I think it just shows you that there’s no excuse. Nobody has a master plan. Nobody has a roadmap. You just have to put on your shoes and carve your own path and just try your darndest. I think the other big thing that really struck me about Mari is the fact that she owns 100% of Bloom Nutrition. What young founders can say that? That’s amazing.

Mindy:
That’s so great because she is in charge of everything. The direction, the success, the failures. Everything she’s doing. She can test it. This is working. Great, we can keep going. Or test it, oh, that didn’t work so well. Let’s pivot. She doesn’t have to answer to anybody except her partner.

Kailyn:
I think that one thing that really came across with Mari is how nimble she is within her business. That’s the power of the social media economy. You could instantly ask your consumers what they’re interested in. You can post something and instantly get a reaction and see if it’s good or bad or if you get interaction. I think that, that’s really the power of the digital age and what a lot of business owners are trying to capitalize on at this point in time. I’m so grateful we had her on the show. I think that it’s a really inspiring story for anyone and everyone and not just from a health and fitness side. Losing 90 pounds takes so much perseverance. Starting a multimillion-dollar business and having it launch in the middle of COVID and then become a US phenomenon, that’s incredible. I think that this was a great story for us to share.

Mindy:
I do too. I really appreciate her time today. Kailyn, should we get out of here?

Kailyn:
Let’s do it, Mindy.

Mindy:
That wraps up this episode of the BiggerPockets Money podcast. She is Kailyn Hope Bennett, and I am Mindy Jensen saying, see you son, we’ve got to run.

Speaker 4:
If you enjoyed today’s episode, please give us a five-star review on Spotify or Apple. If you’re looking for even more money content, feel free to visit our YouTube channel at youtube.com/biggerpocketsmoney.

Mindy:
BiggerPockets Money Was created by Mindy Jensen and Scott Trench. Produced by Kailyn Bennett. Editing by Exodus Media. Copywriting by Nate Weintraub. Lastly, a big thank you to the BiggerPockets team for making this show possible.

Ashley:
This is Real Estate Rookie, episode 349-er. My name is Ashley Kehr, and I am 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. Sometimes, we bring you data, and tools, and tips, and that is what today’s episode is all about.
We’ve got an amazing guest, Ariel Herrera, and she’s a data science by day, real estate investor by night, and she’s going to give you some really cool tips and tricks about using data to be a better real estate investor.

Ashley:
All I want to say is happy holidays, and this is our present to you from Ariel. She is going to give you guys so much information that you are going to want to just sit down and start implementing what she is talking about to accelerate your business. This was also a Christmas present to Tony. If you are watching this on YouTube, you will see Tony, all smiles and distractions, as he tries out every tool that she will suggest today.

Tony:
Yeah, at one point, you’ll hear my browser kind of crash, because I’ve got so many tabs open from other tools that she’s rattling off. I want to give a shout out to someone that left us a five star review on Apple Podcast, goes by the username of Hammond’s Fam, and Hammond says, “A fountain of information every week. I’ve deep dived into real estate investing these past three years, and I’ve been listening four years, and this podcast always has great information that I can leverage in my life and in my real estate journey.”
Hammond’s Fam, we appreciate you for supporting the podcast. Listen, for all of our rookies that are in the community that haven’t yet left us an honest rating and review, please do. It’ll take you two minutes at most, but your review helps us reach more people. The more folks we can reach, the more folks we can help. That is what we’re all about here at the Rookie podcast.

Ashley:
It’ll also be your Christmas gift to us, so you can go ahead and write that into your review as to Merry Christmas or Happy Hanukkah, whatever you are celebrating this season in there for that. We would love that. Let’s welcome Ariel into the show and get right into it. Ariel, I want to start off with talking about your epiphany that you had sitting on a bus. Can you tell us about that?

Ariel:
Yes. About four or five years ago as I started real estate, my real estate journey, I was commuting in and out of New York City for my day job. One day, as I was sitting on the bus around six AM, looking at the New York City skyline, I realized I did not want to do this for the rest of my life. Even though I achieved what my parents wanted, which was to go to a good school, get a good job, I was unhappy.
The reason being is that the time taken away from the commute, working full-time, I wasn’t able to be with my family as often. When I was, I wasn’t always present. With that, I started to research what are the ways I can get out of the rat race? There were three things that kept popping up. One, start an Amazon business, two, daytime stock trading, and three, real estate. Real estate was the one that spoke to me the most. I dived deep into about nine months of research, listening to podcasts, reading books, and watching YouTube videos.
With that, there was one consistent theme that I got from real estate was that there are people who have done this for hundreds of years with less resources than I have, less time, less money. I thought, if they could do it, why can’t I? That’s when I decided to make my journey into going to my first house hack in New Jersey. At that stage, as I was analyzing my own deals, I realized, oh, my God, the data is everywhere. It’s disparate. It’s hard to actually analyze a deal quickly. That’s how I got my journey into real estate and technology.

Ashley:
Tell us about your background in tech. Give us a little bit more in how you’ve actually progressed that into incorporating it with your real estate.

Ariel:
Sure. My technology journey kind of found me, in that I graduated at Rutgers University in business management. Never thought I’d be a programmer, but coming out of school, as I was in my first job, I took a course that another employee was hosting in the middle of the day, and really, it was just to get out of work for an hour. In that process, I learned that VBA, a coding language for Excel, can help automate tasks that you do every day in Excel, it could be lookup, or copying and pasting information. I was mind blown.
I was like, “Oh, my God, this task that takes me two hours a day, I could just code it and automate it within seconds? Sign me up.” From there, started my journey in the data science space. As I started to analyze my own deals, I started to utilize web scraping, APIs, which I could get into, to be able to leverage data to really understand the properties that I’m evaluating and analyzing them.

Ashley:
Before we get into more of your backstory and hearing about your investing journey, we are going to take a short break.

Tony:
Ariel, we’ve talked a little bit about the epiphany that led you into real estate investing, and then you had the shift in your W2 job that led you to data science. Before we go too far, maybe in layman’s terms, talk to me like I’m a fifth grader. What exactly is data science, and how do you think that’s helped you on your real estate journey?

Ashley:
Or just like you’re talking to me?

Tony:
Yeah.

Ariel:
Sure. The exciting thing is that data is all around us. It’s basically information. Say, for a property, some data you might be familiar with is the size of a home, if it’s a single family, number of bedrooms, number of bathrooms, for example. You may want to look at this data, say, on a spreadsheet, where you have all that information. Now, you could probably analyze all properties in, say, New York City within a given spreadsheet, but what if you want to do that across all properties in the US?
A spreadsheet’s not going to handle that, and that’s where data science comes in. We look to derive insights from data, usually large scale of data. To do that we use programming languages like Python to do so, and ultimately create charts, visualizations, and models to help understand characteristics about the data, and what can happen in the future as well.

Tony:
I want to lean into that just a little bit more, because I think for a lot of new investors is that when they’re starting out, one of the biggest questions that they have to ask themselves is, “What city do I want to invest in?” It’s a big question that a lot of people just honestly never even answer because they’re so overwhelmed.
There’s 19,000 cities across the United States, and trying to whittle that list down to something that makes sense for Tony, or for Ariel, for Ashley, it’s hard sometimes. How did you leverage your W2 experience of data science, and taking that list of 19,000 down to a few select cities that made sense for you to invest into?

Ariel:
Yeah, so I looked at economic factors, such as job growth, population growth, unemployment rate, median household income, and some more to analyze a particular area to see if it’s improving or if it’s on the decline. Where I got those metrics from was from government sources like the US Census, Bureau of Labor Statistics, and was able to aggregate that across cities to see it in one single view within a spreadsheet, and then be able to actually draw up charts, and analyze which of these we’re ranking towards the top in their own categories, and start to eliminate cities.

Ashley:
Do you think that a new investor starting out needs to be an expert in data science to analyze a market or a deal?

Ariel:
Not at all, especially with tools today like ChatGPT, that helps to aggregate and lift up information. You don’t need to learn how to code. You can just know how to use the right tools at the right time to answer the specific questions. There’s a lot of free tools.
For example, you could use Redfin. Redfin has data section, where you could download information on a particular market, understand if it’s trending upwards, downwards in terms of pricing, or if its price drops, for example. That can help to analyze a market without using code at all.

Ashley:
Can you give us an example of what you would actually type into ChatGPT? Like say you’re looking at Buffalo, New York, and just give us an example what you would say and type in there to get information back.

Tony:
What person in their right mind would live in a city where it’s negative 20 degrees everywhere? That’s what I would type into ChatGPT about Buffalo.

Ashley:
I literally have two blankets on my lap right now. I’m freezing.

Ariel:
Yes, you could use the ChatGPT and ask, “Buffalo, New York, new development, and growth.” From there, you’d get a synopsis of probably population growth as well as job growth. The new development part I love to put into place, because it will tell you if there’s specific areas where there’s new construction coming, maybe there’s new luxury apartments in the area, and that could also signal growth as well.

Ashley:
That’s very interesting. A couple other resources that I’ve used before were Bright Investor and Neighborhood Scout to actually collect data too. Before that, I was searching every separate single website myself, going to Crime Mapping, going to the GIS County mapping software, every little place I could find data from, but that is very time-consuming. I appreciate you giving us some insight on that, of how to actually accelerate getting all of that information together.

Tony:
Yeah, ChatGPT, they’ve been making some updates to their tool as well, so it’s like 20 bucks a month, like their pro version or whatever it is. Now, you can upload data sets to ChatGPT, and it’ll analyze it for you. It’ll automatically browse the web for you now as well. The tool’s gotten really, really cool in terms of the information it can pull in quickly.
I think for a lot of rookies that are doing that initial research, using a tool like ChatGPT to say, “Hey, what are some markets across the country that have low crime scores and good population growth?” That’ll at least give you a good starting spot. Man, the way these tools are progressing, it’s pretty crazy.

Ariel:
Yeah, it is at a rapid pace. Actually my secret is actually not ChatGPT exactly, but using Bard, Google Bard, its ChatGPT equivalent, but I find it a little bit more superior. It also pulls in data from Google Maps and the whole Google Suite products. That’s actually my favorite one that I use, and it’s free.

Ashley:
Oh, awesome. Thank you for sharing.

Tony:
Yeah, we need do a whole episode on just all the AI tools that are out there. I haven’t tried Bard yet. Ashley, have you?

Ashley:
No, I haven’t.

Tony:
Yeah, me neither. You said it’s free?

Ariel:
Yeah, it’s free. You just activate it on your Google account and you could start typing away.

Ashley:
Well, we know what Tony’s doing the rest of the day. Holding a baby.

Tony:
Yeah.

Ashley:
Using Bard.

Tony:
Playing with some AI tools. Well, so let’s go back to your journey, though, Ariel. You do all this data kind of collection, and where were you living at the time when you first started? You said in New Jersey?

Ariel:
Yes, in New Jersey.

Tony:
Gotcha. Okay. A somewhat more expensive market, right? New Jersey, New York, California, all these places are a little bit more expensive. Do you decide to initially invest in Jersey, and if so, what data did you see that kind of supported that decision?

Ariel:
Yeah, so there were three things I was looking into, which was one, first, how am I going to invest? What’s going to be my strategy? New Jersey, being an expensive market, putting 20% down in a 300K home, so $60,000 down, wasn’t viable for me at the time. I started to realize that the strategy I could take was one where I would live in the property first, and then rent it out after a year, so owner occupying it.
Once I understood my strategy, the next step was, where was I going to invest in New Jersey? Even though it’s a small state, there’s a lot of areas you could find. I wanted to do a 50 minute to one hour commute into New York City, and there were two options there, train or bus. Bus can have traffic, so I chose train. I started to look at different train lines, and what train stations and cities were near those train lines. North Jersey was too expensive, so that was Xed out. The where ended up becoming on the east coast of New Jersey.
There were three towns in particular, Woodbridge, South Amboy, and Matawan that were most interesting. Then the last piece there was, “Well, what am I going to invest in?” I really wanted to invest in a duplex, but again, didn’t have the capital to fund that. I decided on a single family home, but I used data to be able to analyze properties that had an additional bedroom opportunity.

Ashley:
How did you do that?

Tony:
Yeah.

Ashley:
When I think of it, I see like, “Okay, I’m analyzing a Zillow photo, being like, “Now, could I turn that room into an extra room?” Trying to figure out what the layout is just from the photos, have somebody on my team going to look at it or on the MLS. Please, tell us more about that.

Ariel:
Yeah, so my agent that I used at the time was one of my friends. I said, “Jeremy, this is getting difficult to go through Zillow, property after property. Could you send me just a list of the properties in a spreadsheet from your view in the MLS?” He sent me that, and what I was looking for were properties that the size of the square footage was larger than the number of bedrooms, to see if there was maybe a dining room, or some extra space, maybe an office nook, that I can transfer into a bedroom in the future.
With that, I did a quick calculation of square footage divided by bedrooms, and found this one property that was about 1,300 square feet with two bedrooms, which in the area I was targeting, I knew there could be possibly a third bedroom in there. We went to visit the property, and we saw the master bedroom was facing the street, which was kind of unusual. When we went upstairs to it, we saw that there were two closets on each end, two windows, and it looked as if it had been two separate rooms at the time.
Looking back at court records, it actually was. That was what initiated me to put an offer, and ultimately go through with that property.

Tony:
We got to pause there for a second. That is such a ninja trick. I’ve never heard of anyone doing that before, like, “Hey, I’m going to get an export of all of the properties, and then just put a little formula in Excel that compares the bedroom count to the square footage.” Then basically, you were just looking for properties that had a really good ratio between square footage and bedroom count. That is awesome.

Ariel:
Exactly. Simple, but effective.

Tony:
Yeah, because especially now, given where we’re at in the interest rate environment, it’s getting harder to find good deals. You’ve got to get more maybe creative on the front end to find those deals that have opportunity to maybe add some additional value. What you just described is that’s something that every single person listening right now can do is just ask their agent for an export, and then search and filter, and do that little trick. That was cool. I really liked that. Sorry, the nerd in me is geeking out over that one. That was cool.

Ashley:
Usually, you’ll hear people talk about scrubbing the detail of the listing, the description, and looking for office, or bonus room, or something like that to look for an additional bedroom. Yeah, that is great insight, comparing the square footage to the actual bedroom count.

Ariel:
Yeah, multiple ways to go about it.

Ashley:
Yeah. You find this property, and then tell us what happens next.

Ariel:
Yeah, so once we sign to the property, next thing was actually house hacking it. What that meant was having other people live in the property alongside myself. It was my partner, him and I, as well as a family member. My mortgage of $1,800, I was only paying 600 of it, and that really helped to propel me to save more money for my next deal.

Tony:
I was just going to add some clarification there, because I think a lot of times, when people hear the phrase house hack, they immediately think like small multifamily, where I’ve got to go out and get a fourplex or a triplex or a duplex. You can house hack in a single family home.
I don’t remember which episode it was, we interviewed Craig Curelop, and he authored the book on house hacking for BiggerPockets, and he said one of his first house hacks, it was a single family home, I think, but he was renting out every room in the house, and he was sleeping on the couch. Isn’t that what he said, Ash?

Ashley:
Yeah.

Tony:
He was renting out every room and he was sleeping on the couch. Even if you go out and you buy maybe a big, single family home, even if you’re only one person, you can still house hack that. I love that you took that approach, once you realized that the small multifamily wasn’t necessarily in your price range.

Ariel:
Yeah, 100%. Honestly, at first, I was nervous about living with two boys. I was like, “Oh, my god, this is going to be like a pigsty every day,” but it wasn’t at all. It worked out very well.

Ashley:
You know what, there’s no drama, though.

Ariel:
Yes, exactly. Just sports playing in the background all day, but that’s it.

Ashley:
Okay. After you got this first property in your house hacking, is this where you got bit by the real estate bug?

Ariel:
Yes, it was. I wanted to continue investing. I wanted to live in the property for a full year, though. I started to look at other investment opportunities that would be solely an investment where I put 20% down. Unfortunately, New Jersey being expensive, I started to look out of state instead. I particularly looked at Detroit, Michigan, with affordability for properties being lower, as well, I had someone in my network who had invested there and kind of leveraged their knowledge.
What was really exciting there is I started to now get more in depth with my data analytics. I didn’t feel as comfortable at that stage asking the agent for just a download of the data. Now, I’m looking at a wider scope since Detroit’s pretty large. With that, I actually use web scraping. Web scraping is copying information from the web as if you were going to Zillow, and copying down the property address, bedrooms, bathrooms, but instead of doing that manually, you could do it automatically.
I was copying that information down, and I started to get a little bit down on myself because the duplexes were a little bit out of my price range, about 150, 160, and I was looking to spend around 130. I started to look at single family homes, and I put them up in a chart. I wanted to see the distribution, so the characteristics about the data of the properties, to see how many were three bedrooms, four bedrooms, et cetera.
I saw there was one single property that was five bedroom, two bath, single family. I’m like, “Okay, that’s kind of odd.” I go to look further into that property at the description, and long and behold, it says duplex in the description. The agent actually listed it incorrectly, and it was priced about 25K lower than the other duplexes. I was able to make an offer in that case, and get it accepted at a lower rate.

Tony:
Wait, so sorry, I just want to pause and make sure I’m understanding what the scraping process was. How did you scrape all of this data? Is there a tool that you’re using? What are the steps to do that if someone wanted to replicate that?

Ariel:
Sure. At that time, I was using Python to do so, so programming language, but today, it’s even easier. You could use tools like Browse AI, for example, where you basically screen record how you would manually go about the process, what information you want to capture, and then it will automatically get that data for you, either when there’s something new on the web page, or if you want to set it every day, every week, it’ll get that information, and put it into a spreadsheet.
At that time, I did do it with Python, and I was able to get the information across the city for all properties listed on market in a spreadsheet to analyze.

Tony:
Ariel, you’re saying that this tool, Browse.ai, I can sign up for this website, go to any website that I want, screen record the information I want from that website, and this tool, using AI, machine learning, whatever, will pull whatever data I want from that website automatically?

Ariel:
Yes, exactly. There’s many tools similar to it.

Tony:
That’s crazy. I could go to Zillow. This is one of the things I’ve been thinking about recently, and now I’m just asking you selfishly for myself at this point, but we’re looking to do more rental arbitrage, and part of the issue is like, “Man, there’s so many listings for rents, and what’s a super easy way to kind of compare the short-term rental revenue projections to the long-term rental revenue projections?”
That way, I can see what that margin is, and ideally, I only want to reach out to listings that have more margin. Could I use Browse.ai to scrape all of the listings that are currently for rent, and then also scrape the revenue projections from an AirDNA and then compare those two things together? Could I set it up to do that, or am I thinking too far ahead now?

Ariel:
Yes, you could definitely set that up. What’s really cool about Browse.ai is that they have readily available bots for Zillow as well, and I think Redfin too.

Ashley:
Well, I know what I’m doing tonight.

Ariel:
Yeah, and just to add, no code, and it takes about anywhere from 10 to twenty-five minutes to set up.

Ashley:
I better text Daryl to get me an Alani, because it’s going to be a late night. I’m just going to go into a big deep hole of researching all this and setting this all up.

Ariel:
To get started, you could do it all without code using Browse.ai, and there’s actually videos that I have of tutorials, where I take you from beginning all the way to the end of creating these web scraping bots, all on your own, within 20 minutes to set up.

Ashley:
Make sure you check out the show notes after the episode where we are going to link everything. If you get distracted and go to the show notes now, you may miss another amazing link that Ariel has for us, so make sure you wait until the end, but we’ll put them all in there.
Thanks to our great producers and editors that will catch all of these amazing resources that we are learning here. We know Tony has already, have all the web browsers open of each one, making sure he doesn’t forget to go through it.

Tony:
Yeah, I’m just so surprised that Ash and I live, eat, and breathe real estate investing, and that neither one of us have heard of this tool. There are so many things out there now that make it so much easier for the rookie investor to find their first deal. Ariel, thank you so much for showing these tools to people that otherwise never would’ve heard of them before.

Ashley:
I want to say something about that real quick, because I think that’s almost, in a sense, just like real estate investing. When you’re starting out with real estate investing, there are so many different strategies, so many different ways to make money that it’s just overwhelming with all of the options. I almost feel that’s how AI is getting today, that it’s so overwhelming with all of these different things and capabilities that you don’t even know where to start, or things that are available, things like that.
Think about just on this podcast, all of these things that we have learned, like, “Oh, my god, you’re doing what to this mobile home? That’s amazing. We didn’t even know that was a thing.” You’re still constantly learning so much and being educated of all these different ways that you can make money, and also be efficient and effective at running your business.
Ariel, let’s get back to your story, now. Now that we’ve got on these tangents, and I am sure there’s going to be another one that me and Tony are wowed by and need to implement immediately into our business. We left off that you were looking into Detroit. You were scrubbing for properties. Did you find one?

Ariel:
Yes, I did. It was that property that was a five bed, two bath listed a single family, but was actually a duplex, and was able to get that at a discount of around 25K because of that.

Ashley:
The discount was 25K, or you got the house for 25K?

Ariel:
Oh, no, the discount. That would be incredible, right?

Ashley:
I was going to say, we have heard of houses being cheaper in Detroit, but I was saying, it’s been a long time since we’ve had anyone say they got a house for 25,000.

Tony:
You said it was listed as a duplex, so did you have to go in and do any work to it, or was it truly already a duplex, and they just listed it incorrectly?

Ariel:
Yeah, truly a duplex. I went to the county website just to confirm, and it was. It was just listed incorrectly by the agent.

Tony:
Wow, that is insane. You found two killer deals just by finding little nuances in the data, which I think is super interesting.

Ariel:
Yeah.

Tony:
Then I guess just one side question, Ariel, a lot of people, I think, have fear of investing out of state, and even more so people, Detroit, with some investing groups, has a bad stigma. Were you not nervous at all about investing out of state for your second deal?

Ariel:
I was nervous, and I went in person to get some boots on the ground, just to solidify what I saw in the data. Prior to, I was looking at Niche.com, which gives overviews of neighborhoods, and I wanted to find a neighborhood in Detroit that was more so skewed of ownership versus renters. Since usually there’s pride in ownership, maybe the lawn is more up kept, less trash.
There was a neighborhood that I was particularly interested in, Bagley District in Detroit, and luckily, having boots on the ground helped me to confirm that’s where I wanted to invest.

Ashley:
Let’s kind of talk about your confidence in investing out of state. How did you build your team there and feel comfortable investing out of state? Sometimes that is a barrier of entry for people is that they don’t know anyone in a market, and they don’t trust a lot of people. What are some of the things that you did to feel comfortable and confident investing out of state?

Ariel:
Yeah, I read David Green’s book, Investing Out of State, and that really helped me, because as someone who’s very methodical, being like a data scientist, I like to have a checklist of what I’m doing. I felt like that book was my checklist. In the back of my head, my mom, she was always like, “Ay Ariel, why are you doing this? Why are you investing out of state? Just sell a property you have. Sell everything.”
That’s always her mindset, but at the same time, she holds me accountable to follow criteria. She read the book too and she was like, “David Green said to follow this step as well. Make sure you talk to your agent about these things, your lender about some other topics.” I think properly screening my agent, my lender, meeting them in person as well really helped me to feel confident and be able to invest in Detroit.

Ashley:
You were starting to talk about, before I rudely interrupted you, but you were talking about your next market that you decided to focus on.

Ariel:
Yeah. Now, it’s March of 2020, and I’ve been able to save money by house hacking the property that I was currently in. I have some money saved, and then the pandemic happens, and a lot of people are moving to remote work. I selfishly had already been working remotely twice a week, and I was like, “Ugh, I wanted to keep this secret to myself, and now everyone’s going to work remote, realize how amazing it is.”
I thought, though, there could be some opportunity here. We always hear if you could invest in 2008 way long ago, you would be well off today. I thought even though despite this, what’s going on in the world, maybe there’s opportunity here. There were two things that I noticed that I liked about working remotely. One thing was, or I guess an epiphany, was weather. If I could work anywhere, why am I working in cold New Jersey where I can’t do things for six months out of the year? Sorry, Ashley, I know you’re a New York girl, but not my preference.
Then the second piece was income. In my head, I was like, “If I could work anywhere and program anywhere in the world, why would I do it in a place where I’m getting income tax? If I move somewhere else, I could instantly give myself a bonus of 10 to 20K instantly, just by leaving the state.” I thought, “If I’m thinking that, other people would think that soon too.” April 1st is when my partner and I, he and decided we were going to do whatever it took, eight weeks, figure out a market, figure out a place to live, and rent out our property on our own for the first time.

Ashley:
That’s super exciting. Do you want to kind of give us some of the numbers on a couple of your deals?

Ariel:
Sure. A property that I have in Tampa, Florida, a single family home, purchased it for 274K, put 5% down, was able to house hack it. At that time, my portion that I was putting myself was 550 a month. When I ultimately rented it out, the whole house itself, it was at 2,500. My cash flow there was about 700 or so.

Tony:
Wow, that is amazing. I’m shocked right now. These are such good deals, and the way that you’re finding them, it’s amazing.

Ashley:
What has been your favorite deal so far?

Ariel:
Yeah, my favorite deal was probably my property in Tampa, Florida in the Seminole Heights area. At that time, I had already been living in the Tampa area for about a year, but I wanted to find an up and coming area so that I could really leverage having a house that appreciates, and then be able to use that money in the future for maybe a future rental property. I was having difficulty at that stage, because it was 2021, people were outbidding one another left and right, getting a lot of people from the north who were coming with all cash offers.
I would be sitting in a meeting, I would get a notification on Zillow, a new property, met my criteria, but by the time I analyzed it at night, there was already people who saw the property and possibly already outbid me. What I decided to do analytics-wise is I paired my notifications that I got from Zillow with Zapier. Zapier is a tool that allows you to communicate with different applications. What I would do was every time I got that email, I would strip the email, take out bedrooms, bathroom, price, and property address.
I would then take that and then go to an API, so a way to get data externally for that property. Next step was automatically calculating cash flow through Zapier, just adding a couple of calculations. Then this last piece there was sending myself a text message if it met my criteria. Now, as a data scientist, I’m sitting in meetings throughout the day, and I could just get notification once the property in my criteria also met my certain cash flow metrics. It saved me a lot of time down the line.

Tony:
Sometimes, we interview guests…

Ashley:
If you guys aren’t watching this on YouTube, you need to watch Tony’s facial expressions.

Tony:
We use Zapier in different parts of our business, but I’ve never thought to use it to help with deal analysis. You’re so close to the problem sometimes, you don’t realize that the easy solution is staring you in the face, and what you just shared is such a simple solution to be able to move faster when it comes to deal analysis.
A lot of that high level stuff, it is just basic formula. You can kind of go in and do some nuanced if you want to, but man. Sometimes we interview guests, and we end up learning more, I think, than even our audience does. I love this conversation. That’s amazing. Ash, have you used Zapier at all before?

Ashley:
Yeah, but literally just like my National Fuel invoice comes into my email, it gets filed into my Google Drive. That’s it, more of just filing stuff, the emails that I get regularly. You use it too, right?

Tony:
Yeah, we use it quite a bit, more so on the marketing side, but yeah, never for actual deal analysis, which that just unlocks a whole new level here.

Ariel:
Yeah. The exciting part there, it was actually no code to set up. Pretty easy, just using all of Zapier’s readily available tools.

Tony:
Guys, for our rookies that are listening, hopefully you’re not feeling overwhelmed by some of the talk that’s going on, because a lot of what Ariel said is like, “Yeah, you don’t need to know how to code. You can probably watch a couple of YouTube videos, figure this stuff out.” She’s given you tools that are literally just, click the buttons you want to click, and the tool’s going to do what you want it to do.
Just having the courage to go out there and start playing around with some of these things, I think, gets you on the road to using them in the way that Ariel has here. Backtracking quite a bit, I don’t know if we asked this question up top, but if you can just set the table for us, Ariel, what does your current portfolio look like today?

Ariel:
Six units.

Tony:
Across how many different markets?

Ariel:
Four different markets, so New Jersey, Detroit, Tampa, and then Playa del Carmen.

Tony:
Playa del Carmen? All right.

Ashley:
Let’s talk about that one.

Tony:
Yeah.

Ashley:
Did you do kind of the same market analysis, or was this because you want to vacation there? Tell us a little more about sourcing that deal.

Ariel:
Yeah, similar market analysis, kind of thinking, “Okay, if everyone can work remotely now and they have the choice to work, say, out of the country, where would they most likely work?” There’s two options. If you’re going out of internationally, probably Canada or Mexico would be the top, since they’re still in North America. Mexico’s warmer. I thought more people would move down there.
I started to look at cities around major airports, so Cancun being one of them, I saw Playa del Carmen was a city that’s had a lot of growth over the last several decades, and in particular, it was already growing as an expat hub. I was going into the Facebook groups and seeing people communicate there about loving living in Playa del Carmen, the low cost of living, and some information about investing there too. With that, I started to sync with multiple different agents to talk about new development condos that I could possibly invest in.
I was a bit wary at first, because there could be scams investing abroad. I read up a lot on that, and I made sure I went with a developer that already had completed 18 condo buildings. I knew that there was already backing, and felt more solidified to go through with that deal.

Ashley:
How did you finance this deal?

Ariel:
I financed the deal initially with a down payment that I had from a 401K from a job that I changed through, but I actually didn’t have the rest of the money that I would need. The deal was 160, put 60K down, but I didn’t have the 100 grand. I was like, “Well, you know what? I’m going to figure it out as I go along.” It helped me to get creative. There were two things that I did.
One, all the knowledge that I’ve had about analyzing a market and list building, I put that into courses, which helped me to raise money for my deal. On the second end was that house that I had in Tampa Florida, that appreciated quite a bit, if in only a year. I was able to get a HELOC, so a home equity line of credit, on that property, to then pay off the rest of the Mexico condo.

Ashley:
Then you just used money from that condo to pay off your line of credit?

Ariel:
Exactly.

Ashley:
That’s such a great tool to use is to looking at your other properties, leveraging them to purchase another property. I think sometimes, it’s easy to get caught up as to like, “Oh, well the cashflow on my duplex, if I take a HELOC out on it, my rents won’t cover the HELOC.” Well, no, you take the cashflow for the rents from your new property, and go ahead and pay that off.
Just because the collateral isn’t the same doesn’t mean that you can’t take rent payments to pay off debt that you used to purchase and fund that property. That’s for another property.

Tony:
Then for the Playa del Carmen property, Ariel, are you short-term renting that, long-term, medium-term? What’s the strategy on that property?

Ariel:
It’s a short-term rental, and the plan that, if I needed to, I could always live in the property.

Ashley:
I’m trying to look out your window right now and see what’s the background there. It’s not Mexico?

Ariel:
No, it’s Tampa, Florida.

Tony:
Just you being in Florida, building out that team that you need to run a short-term rental in a different country, I’ve never even done that before, what steps did you take to find good cleaners, good handymen in that local Playa market?

Ariel:
Yeah, luckily there’s already a property management company that was synced with the condo building, as most investors are taking the same strategy. I did speak with them, asked a few questions, felt comfortable, and they’ve handled that part on their own. Then I’ve also Airbnb’d my property in Tampa. I’ve taken a similar approach of working for property manager.

Tony:
Let me just, final question on that piece. What made you go the property manager route, even for the Tampa home versus doing it yourself?

Ariel:
Oh, I wanted to really do it myself completely, just to save cost, but I had to take a step back and reflect, and realize all the things that I’m doing doesn’t end up being worth my time to answer calls, to, say, clean a property when I could be coding, and developing solutions, and helping out other people. It had to do a give and take.
Luckily, in that case, with the Tampa Florida house, I was able to get 15% for a property management fee, which is actually pretty low for the industry standard, since a friend and I did it at the same time for our properties.

Ashley:
Well, thank you so much, Ariel.

Tony:
Yeah, so much good information. I feel like we keep talking, we just got to keep bringing you back. I got so many more questions to ask you about all these [inaudible 00:38:27].

Ashley:
I know, once we start actually digging into it, we’re going to have a lot of questions, but we’re going to turn to your YouTube channel to check those out. Make sure you go into our show notes to find Ariel’s YouTube channel to learn more. We do have a Rookie Reply for you today. If anyone would like to submit a question, you can go to biggerpockets.com/reply, and insert a question that we may play on a Rookie Reply episode, or we may ask it to a guest.
Today’s question is from Laurel. I’m working towards getting my first property, and I’m considering going off market to really be able to find a property that is a deal. I see properties posted on Facebook, but because I still have my W2 and work during the day, I tend to be too late to get in contact with the sellers, and the deals are already under contract by the time I found the listing. Is there a way to see properties or be notified when properties are posted to social media? Thank you.

Ariel:
Yeah. Here’s where we could use web scraping bots, similar to Browse AI as well as Applify. We can take the link of our Facebook group, plug it in, and then screen record how we would capture a deal, what is the information we want to get from that post, possibly the listing price, maybe an email we want to take from it. Then from there, we can have it set up on a daily structure, where we get information in a spreadsheet that came from that Facebook group.
That way, we don’t have to go in manually every single day to get that, or we could even set it up on another way, where we get automatic notifications every time the page changes based on our parameters. We could set that up with no code at all, be able to read in data from Facebook groups, put it into a spreadsheet, and have that ready to analyze right away.

Ashley:
Wow, that is super cool. I actually spend a lot of time on Facebook Marketplace. I really don’t like social media in general, but there actually have been a lot of great off-market deals posted on Facebook marketplace, and they do get traction so fast. I’ve been looking at lake houses. A lot of times, people will list their lake house in the Facebook group of like, I don’t know, the example Lake Association, Be Neighborly, or something like that.
It will post it. People will post it in there, or they’ll even say, “We’re interested or thinking of selling our property,” and stuff. The next day, it’s already sold. It’s gone.

Tony:
I’m just going down the rabbit hole right now of all the tools that Ariel is sharing with us. I guess just for my own knowledge, between Applify and Browse.ai, which one do you like more?

Ariel:
I like Browse.ai more. However, if there’s a custom site that you want to scrape, say it’s a foreclosure website, or maybe something about the county website, probably going an Applify way would be easier, because you can actually contract out specific freelancers for more intricate web scraping tasks. They both serve a purpose, but a little bit differently.

Tony:
Man, amazing. All right, let’s go to our Rookie exam. These are the same three questions we ask every single guest. I’m getting caught up in my words because I’m so excited from the tools you’re sharing with us. Question number one, Ariel, what’s one actionable thing Rookies should do after listening to your episode?

Ariel:
Number one thing is to be data-driven. Don’t just go into Zillow, select a property at random and say, “I’m going to invest in that.” You could use data-driven tools that are for free and readily available. We could use Bard, Google, or ChatGPT to ask questions, start to narrow down what areas you may be interested to invest in.
You could also use free resources from Zillow and Redfin. They have posts every single month from their data centers on meeting listing price, rent prices, sales cuts, and that can help you to start to analyze where you want to invest, and where has more growth versus areas that are declining.

Ashley:
What is one tool, now, this is going to be hard to narrow down, one tool, software app, or system in your business that you use today?

Ariel:
Selflessly it would be Coffee Clozers, the company that I’ve co-developed with two other folks, to help find cash flowing deals in up and coming areas, and to tag properties that have opportunity. We’re able to get information from the MLS, and aggregate that data to help pinpoint what is the right deal at this moment to be investing in?

Tony:
For our last question for you, Ariel, where do you plan on being five years from now?

Ariel:
Five years from now, I hope to be full-time within my real estate startup company. It’s accelerating, and we’re helping people find deals, as well, I would like to be financially free, where I can help underprivileged communities learn how to program. One thing that I’ve taken away from my tenure, apart of my career, is I’ve never actually worked with another Dominican data scientist. I’m always the only one, which has come with some barriers, but I would love to be able to help others get into the programming space.
Unlike other careers, where you sometimes need to have some wealth to afford the right degree, or have the right network, programming, you can just get started instantly. All you need is internet connection. You could go to a library and use their computer. As long as you have an interest and curiosity, it’s a great field to go into and I’d love to help people there.

Ashley:
Well, Ariel, thank you so much, and you have helped a lot of people already on today’s episode. Thank you so much for taking the time to share your knowledge, and experience, and for us to learn about your investing journey. Well, Ariel, thank you so much for joining us on this Rookie episode. I’m Ashley at Wealth From Rentals, and he’s Tony at Tony J. Robinson. We will see you guys for our next episode.

Sometimes, a borrower might confuse a mortgage broker with a loan officer or mortgage lender. However, there are differences between these roles. Before a soon-to-be homeowner takes out a mortgage, they should understand what a mortgage broker is, the benefits of using one, and how to choose the best broker. This guide can help borrowers decide if using a mortgage broker is the right decision.

What Is a Mortgage Broker?

A mortgage broker is the middleman between mortgage borrowers and mortgage lenders. They do not use their own capital to originate loans. Instead, a mortgage broker connects lenders with borrowers based on the needs and financial situations of both. They do this by identifying the best mortgage for each unique borrower.

The broker gathers necessary documentation from the borrower, such as income statements, asset information, bank statements, and employment verification. They will also pull credit reports, assess credit scores, and look at credit card and personal loan debts. 

The mortgage broker will complete the loan application and determine the ideal loan amount, loan-to-value ratio, loan terms, and loan type. Then they submit the loan application to a lender for approval and underwriting.

Mortgage brokers can save borrowers time during the application process. They also save them money over the life of the loan. After the mortgage lender distributes the funds, the mortgage broker collects a commission fee as compensation for their services. The broker only gets paid when the loan transaction is complete.

Mortgage Broker vs. Mortgage Lender vs. Loan Officer

Mortgage brokers differ from mortgage lenders and loan officers.

Unlike a mortgage broker, a loan officer is a representative of a financial institution, such as a bank or credit union. They offer direct assistance to borrowers taking out residential mortgage loans. Loan officers, or mortgage loan officers (MLO), are the contact for most borrowers applying for home loans from financial institutions.

Once a borrower agrees to proceed with a lender, the loan officer helps prepare the application. Then they pass it to the lending institution’s underwriter, who assesses the creditworthiness of the potential borrower. If the underwriter approves the loan, the loan officer prepares the closing documents.

A mortgage lender is the one that actually provides funding for the mortgage. Many consumers prefer to use a well-informed mortgage broker to help them find the right mortgage lender. In fact, the reason financial institutions have so many branches is that they want to connect loan officers with potential borrowers. A broker can bridge the gap by helping borrowers and lenders come together.

Some loans are more work than others, such as secured loans versus unsecured loans. Mortgage loans require a hefty stack of documentation. This is because of the many related federal, state, and local regulations.

Mortgage brokers can simplify the mortgage process for both borrowers and loan officers. They do this by ensuring that borrowers have the qualifications required by lenders before taking any steps in the mortgage process.

The Role and Responsibilities of a Mortgage Broker

Navigating the mortgage market can be overwhelming, but a mortgage broker can help. 

There is some overlap between a mortgage broker and a loan officer. Both roles know about various loan products. They can help borrowers with buying or refinancing a home. They’re well versed in the mortgage market and can advise borrowers on how to find the right mortgage. Mortgage brokers offer insight into loan eligibility, as they’re responsible for the initial screening process.

A mortgage broker works on the borrower’s behalf to find the lowest available mortgage rates and best loan programs available. To do so, they look into multiple lenders for their clients. The number of lenders accessible to the borrower will be based on the broker’s ability to work with each lender.

Brokers do not receive compensation unless the loan closes. Therefore, it’s in the broker’s best interest to work with borrowers on a more personal level. If a loan originates through a broker but a lender declines it, the broker will then apply to another lender. Meanwhile, if a loan originated through a loan officer is declined, no further action is taken with the financial institution.

Benefits of Using a Mortgage Broker

Working with a mortgage broker saves time and legwork for the borrower. Mortgage brokers know how to navigate the mortgage market and can act as a guide. They have connections with a broad range of lenders. A broker can steer borrowers away from mortgage companies with unfavorable payment terms?.

Mortgage brokers have better access to lenders. In fact, some lenders work exclusively with mortgage brokers, relying on them to bring in leads. 

You can contact lenders directly for a mortgage. However, brokers often get lower rates and better terms from lenders because of the business volume they provide. Brokers can also help manage mortgage-related fees, including the application, appraisal, and origination fees that lenders charge.

How Much Do Mortgage Brokers Charge?

Whether buying a home through a real estate broker, real estate agent, or homeowner, borrowers can work with a mortgage broker. Mortgage brokers make a commission that usually works out to 1% or 2% of the loan amount. This differs from loan officers, who get a salary and are not incentivized by loan volume or amount. 

How do mortgage brokers get paid?

Mortgage brokers receive their commission from either the borrower or the lender when the loan closes. Usually, the lender pays the mortgage broker, which allows them to advertise a “no-cost” loan. However, the broker’s commission might still be rolled into the loan via a higher interest rate. The broker may charge different fees, depending on who pays their commission.

The mortgage market, home prices, and loan competitiveness will help determine the commission rate a mortgage broker receives. In more competitive markets with high-priced properties, brokers may have lower rates. Federal regulations limit mortgage broker fees to 3%, and they must disclose any fees to borrowers upfront.

How to Choose a Good Mortgage Broker

To find a mortgage broker near you, consider reading online reviews prior to choosing one. Here are some tips on finding the best broker to get a mortgage with favorable rates and terms:

• Referrals work best: Ask someone you know, like a friend or family member, who has recently bought a house to share their experience with a broker. Tell them you want to hear the good and bad.
• Leverage your current bank: Reach out to your current financial institution for mortgage broker references. You already have a relationship with your bank, and it’s in their best interest to help you.
• Ask your real estate agent. Real estate agents can offer guidance on local brokers with solid reputations and who they have a relationship with. Make sure you do your own research, though.

Questions to ask mortgage brokers

Before choosing a broker, be sure to ask plenty of questions. Likely, you’ll be most interested in mortgage rates, but before committing to a particular mortgage broker, ask these questions:

• Do you have a list of lenders you work with?
• Can you provide a complete list of fees you typically charge?
• What’s your normal commission rate, and who pays it?
• Do you have different rates for lender-paid versus borrower-paid commission?
• Will the lender waive some fees, such as the appraisal or closing costs?
• What are the typical down payment requirements?
• Do you work with FHA-, VA- or USDA-approved lenders? 
• What is the typical turnaround time for preapproval?
• How long does it take from choosing a house to closing on the loan?
• Can you provide a list of references?

Final Thoughts

A mortgage broker can save you a lot of time when you’re searching for the best mortgage lender. Brokers have a lot of experience helping real estate investors and individuals get home loans. Their expertise can help you get the best deal on a mortgage, and they often have the right connections.
If you need recommendations for mortgage brokers in your area, check out the BiggerPockets forums. Here, you can get advice from people who share your goals and aspirations.

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